(Reuters) - Tyson Foods Inc (TSN.N), the biggest U.S. meat processor, reported better-than-expected quarterly sales on Monday, sending its shares up by over 10 percent as strong demand for chicken products and a boost from its purchase of sausage seller Hillshire Brands buoyed results.
Tyson said sales and operating income in the chicken business, its second biggest, grew amid robust demand and lower feed ingredient costs.
Shares jumped 10.2 percent to $48.13 in midday trading after executives issued upbeat guidance, signaled improvement in its beef business and identified new benefits from its Hillshire acquisition.
The company bought Jimmy Dean sausage maker Hillshire Brands Co last year for $8.5 billion. Executives forecast additional savings from the deal over the next two years, and said it paved the way for the launch of a new Jimmy Dean branded bacon product in early 2016.
Tyson posted an operating loss in the company’s beef business, its largest, due to export market disruptions, lofty prices and futures market gyrations during the quarter.
Executives said demand began to rebound over the past month as beef prices finally began to ease and exports ticked up.
“We think the worst is behind us in beef,” Tyson Chief Executive Donnie Smith said on a conference call with analyst.
The company is also rebuilding its turkey supplies after a devastating avian flu outbreak and is waiting for poultry export markets to reopen.
Tyson’s chicken business continued to struggle in China, where wholesale chicken prices are at record lows and the economy is cooling. Executives said they planned to make that business more consumer-focused, but declined to give specific details.
The company and its meat suppliers are working hard to avoid recurrences of avian flu and porcine epidemic diarrhea virus (PEDv), which in the past have crushed supplies of poultry and hogs, executives said on a call with journalists.
Net income attributable to Tyson rose to $258 million, or 63 cents per share, in the fourth quarter ended Oct. 3, from $137 million, or 35 cents per share, a year earlier. Excluding items, it earned 83 cents per share.
Total sales grew 4 percent to $10.51 billion. Analysts on average had expected revenue of $10.27 billion, according to Thomson Reuters I/B/E/S.
For fiscal 2016, Tyson forecast revenue of about $41 billion and adjusted earnings of $3.50 to $3.65 per share.
Reporting by Lisa Baertlein in Los Angeles and Sruthi Ramakrishnan in Bengaluru; editing by Savio D'Souza, G Crosse and Bernadette Baum