Second-quarter 2015 was another great quarter for Tyson Foods (TSN, Financial) and better than the analyst expectations. Normally, second quarter is seasonally challenging, but the management came in above the projections due to strong performances by the company Prepared Foods and Chicken segments.
The company’s branded value-added portfolio of complementary products has allowed the company to achieve the balance needed to produce consistent and sustainable growth. Therefore, the management has structured the company to capitalize on the tailwinds and to manage through the headwinds in the parts of the company’s business that are subject to commodity markets.
Tyson Foods by producing innovative protein centric foods have reached a place whereby the company is uniquely positioned to meet the consumer’s needs for all meal occasions and all dry parts at home and away from home. The acquisition of Hillshire Brands has played a significant role in Tyson Foods' transformation, and the management is pleased with the progress of the integration and synergy capture thus achieving $77 million in synergies in the second quarter of 2015.
Tyson Foods is ahead of pace in reaching the stated target of more than $225 million in fiscal year 2015. The company has raised the synergy target to more than $250 million for the ongoing year, $400 million in 2016 and $600 million in synergies by the end of the fiscal year 2017. Further Tyson Foods are reiterating the annual guidance of $3.30 to $3.40 adjusted earnings per share.
In the second quarter of 2015, the company’s sales increased by 10% to approximately $10 billion. Moreover, in the second quarter of 2015, the company adjusted operating income increased by 53% to $553 million.
Furthermore, adjusted EPS was up 25% to $0.75 in the second quarter of 2015 compared with $0.60 in the second quarter last year. In addition, overall adjusted operating margin was 5.5%.
Moreover, chicken segment operating margins reported as 11.7%. The record Prepared Foods segment adjusted operating margins of 8.4% while pork segment operating margins reported at 8.2%. Overall, $77 million was captured in total synergies during the second quarter of 2015. The company gives its outlook forecast for the fiscal year 2015 sales to approximately $41 billion as the company integrate Hillshire Brands and continue to accelerate growth in domestic value added chicken sales and Prepared Food sales.
Moreover, in fiscal year 2015, Tyson Foods expects domestic protein production such as chicken, pork and turkey to increase approximately by 2% from the fiscal year 2014 levels. Further grain supplies are expected to increase in the fiscal year 2015, which should result in lower input costs as well as decreased costs for cattle and hog producers. Based on the strong demand forecast and anticipated favorable pricing environment, the company’s chicken segment operating margin should be approximately 11% for the fiscal year 2015.
Furthermore, in the beef segment, the company expects to see a reduction of industry fed cattle supplies of 5-6% in the fiscal year 2015 when compared to fiscal year 2014. Although Tyson Foods generally expects adequate supplies in the regions where company plants are based, there may be periods of imbalances of fed cattle supply and demand. The company believes that beef segment will be profitable in the fiscal year 2015, which is below to fiscal year 2014.
In the pork segment, the company expects hog supplies to increase by 4-5% in the fiscal year 2015 when compared with the fiscal year 2014. The company believes pork segment operating margin will be in its normalized range of 6 to 8%.
In the prepared foods segment in the fiscal year 2015, the company expects to realize in excess of $250 million of synergies from the acquisition as well as the company’s profit improvement plan.
With Tyson Foods heading for a stronger profit growth, the company is hoping to apply some new strategies to attract more customers and one way they hope to do so is by opening additional retail stores. The going is good so far for the company and is set to get even better in the future.
