Tyson Foods earnings whiff as low beef prices hit profits

Yahoo Finance Live anchors discuss first-quarter earnings for Tyson Foods.

Video transcript

[AUDIO LOGO]

BRIAN SOZZI: Shares Tyson who's getting grilled this morning after missing analysts' estimates in its latest quarter. The company reporting a 70% drop from the prior year in its adjusted earnings per share. CEO Donnie King citing market dynamics and operational inefficiencies impacting profitability for Tyson scoop-- Tyson Foods. Bottom line, not a good quarter from this company.

An interesting shift potentially here. So in the pork division, we saw prices up 1.4%. The volume for that division fell 7.4%. Looks like people dropped pork and went into beef. Beef volumes up 2.9%, despite even with-- or looked like an 8 and 1/2% price decrease. So bottom line is, rotation from pork into beef. So they're going long with beef, short pork.

JULIE HYMAN: I just want to put a fine point on how terrible these numbers were. These numbers were--

BRIAN SOZZI: Awful.

JULIE HYMAN: --terrible. The GAAP earnings per share $0.88. $1.33 is what analysts had been looking for. And the sales didn't look as bad, it had to do with margins. You just mentioned pork. Operating margins of pork were negative-1.4%. You don't see a negative operating margin too often.

So basically, they were just caught up in a situation where you've got prices falling for many of their proteins. But in some cases, they're still paying higher prices, even though the prices for consumers are falling.

BRIAN SOZZI: They got roasted, Julie. They got roasted.

JULIE HYMAN: They got roasted.

BRIAN SOZZI: They got roasted.

BRAD SMITH: Yeah, it was almost something where I had to clean my glasses off when I was looking at these earlier on. Because, I mean, you look at some of the year-over-year comps on the operating income front, this time last year for this quarter last year, they were bringing in about $1.4, $1.5 billion here. Brought in $467 million in operating income this year.

And it does come back to all of the different price fluctuations, as well. You were talking about beef and pork. Well, the average price change for beef that was down 8 and 1/2% versus the up 31% year-over-year estimate-- or the estimate was for-- down 7%, was down a little bit more than that. But you compare that to last year when it was up 31%. So a massive wipe out there.

BRIAN SOZZI: Yeah, not to pull all the feathers out of this company here but there was a positive area on the prepared foods. The operating margins up 220 basis points year-over-year. And that fits with some pretty good overall results from the prepared foods players-- Conagra Brands, you name it. PepsiCo reports earnings later this week. Some of these companies have had a lot of success pushing through higher prices. And in the case of Tyson, that's Hillshire Brands and Ballpark hot dogs.

JULIE HYMAN: So working they're--

BRAD SMITH: Chicken nuggets, too.

BRIAN SOZZI: Chicken nuggets.

JULIE HYMAN: Not working--

BRAD SMITH: Chicken McNuggets.

JULIE HYMAN: Not working elsewhere, though, in besides those finished products.

BRIAN SOZZI: This quarter really flew away from, Julie.

BRAD SMITH: [CHUCKLES]

JULIE HYMAN: I was looking to see if the transcript of the earnings call was up yet, if there was any talk of eggs. Even though Tyson doesn't sell eggs directly, maybe there would be some implications for the, you know, poultry flocks.

BRIAN SOZZI: I see where you're going, chickens and the, yeah, eggs.