Tyson Posts Lower-Than-Expected Profit, Warns on 2006

CHICAGO – Tyson Foods Inc. (TSN) on Monday warned that 2006 profit would fall below analysts' estimates and reported a lower-than-expected fourth-quarter earnings as its beef export business slowly recovered from the 2003 mad cow scare.

The forecast drove shares of the No. 1 U.S. meat company down 8.7 percent.

U.S. beef exports, including Tyson's, continued to be banned by many countries, including Japan, once the top overseas buyer, since the first U.S. case of mad cow disease was discovered in 2003.

For the fourth quarter, earnings rose to $98 million, or 28 cents a share, in the fiscal fourth quarter ended October 1, from $66 million, or 19 cents, a year ago.

Excluding one-time items like a tax benefit, earnings were 25 cents a share. On that basis, analysts, on average, expected 31 cents per share, according to Reuters Estimates.

The ban may soon end after a Japanese government panel recently ruled that beef from cattle 20 months of age or younger is safe.

Tyson forecast fiscal-year 2006 earnings of 95 cents a share to $1.25 a share. Analysts, on average, expected $1.33 a share.

"It looks like they are saying beef will improve only gradually," said Tim Ramey, analyst at D.A. Davidson, who rates the stock as "buy."

The beef business had a $13 million operating loss in the quarter, compared with a profit of $40 million a year earlier.

The company had expenses of 3 cents a share related to the impact of Hurricane Katrina and said it expected more Katrina-related costs in the first quarter.

Sales fell 9 percent to $6.5 billion, as the quarter had 13 weeks in 2005, compared with 14 weeks in 2004.

Operating profit at the chicken processing unit rose to $137 million from $98 million, helped by lower feed costs.

Pork profits rose to $32 million from $23 million.

Tyson shares fell $1.60 to $16.90 Monday on the New York Stock Exchange.

At the end of last week, Tyson shares were up about 2 percent for the year, compared with a 6.5 percent decline for the Dow Jones U.S. Food Producers Index.

Tyson stock trades at about 17.6 times fiscal year 2006 earnings, compared with about 16.3 times for the Food Producers Index.