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Tyson Foods Shares Hit All-Time High As Meat Prices Soar
As meat prices continue to soar, investors are cheering on meatpackers such as Tyson Foods. The meatpacking giant’s stock prices posted a 52-week high after reporting that its profits doubled in the first quarter of 2022.
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Soaring Meat Prices Led To Tyson Foods’ Profits
Shares of the food company rebounded from a one-month low last Friday to hit $99.20, its highest in a year. This also represents a 14% gain from the start of the year.
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Tyson Foods’ surge in stock prices reflects its dominant standing in the meat industry.
Strong demand and high prices for its beef, pork, and chicken products are all contributing to heftier profits. In addition, the current US labor shortage also ensures that supply remains limited.
According to CEO Donnie King, “customer demand continues to outpace our ability to supply products.”
Tyson’s Meat Prices Jumped Nearly 20% on Average
Despite the jump in prices, demand for Tyson Foods’ products continues to pace the market. Tyson’s beef prices surged by an average of 31.7% in the quarter ending January 1.
Meanwhile, the unit’s operating margins jumped to 19.1% from 13.2% a year ago. The average increase for all of Tyson’s meat products was 19.6%.
As a result, overall sales for beef jumped by 25% to $5 billion. This contributed to the increase in Tyson’s sales by 24% to $12.93 billion for Q1. Wall Street analysts expected something lesser, as they predicted $12.18 billion in sales instead.
Meanwhile, net income attributable rose to $1.12 billion. Excluding items, Tyson generated earnings of $2.87 per share, which beat analyst estimates of $1.95 per share.
Tyson Raised Meat Prices To Offset Higher Costs
The company said it had to increase its meat prices in order to offset costs for labor, transportation, and feeds. Cost of goods rose by 18% in the first quarter. In particular, King expects that grain prices, which cattle feed on, will continue to rise.
However, Tyson tried to offset the increase in meat prices by restructuring its chicken pricing strategy. The adjustments will make pricing more flexible as it asked customers to pay for freight rates, which surged by 32%.
Adam Samuelson, the lead agribusiness analyst at Goldman Sachs, noted that Tyson is “ dealing with a very inflationary environment” across their businesses.
Tyson, 3 Others Control 85% Of Cattle Industry
Tyson’s increased prices and nearly double profits won’t remain unnoticed by industry watchers. Agricultural officials in the Biden administration are keeping a close watch on the US meatpacking sector.
Previously, the White House criticized the lack of competition in the industry. Tyson and three other conglomerates own about 85% of grain-fattened cattle carved into steaks for consumers.
The other companies are Brazil-based JBS SA, the world's biggest meatpacker; Marfrig Global Foods SA, and Seaboard Corp. Marfrig is the majority owner of the National Beef Packing Company.
Financial statements from the four show that they collectively earned a 120% increase in their gross profits since the pandemic. They also generated a 500% increase in net income.
Watch the Yahoo Finance video reporting that Tyson Foods Q4 earnings beat expectations as meat prices jump:
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