Tyson Foods' net income jumped 86 percent jump its fiscal first quarter, helped by improving chicken sales and rising prices for beef and pork, the meat producer said Friday.
Tyson's shares climbed 5.7 percent to close at $18.56 on Friday.
The improvement is a strong signal the meat producer, based in Springdale, Ark., has recovered from an industry downturn brought on by a combination of higher production costs and slumping demand as shoppers cut spending.
CEO Donnie Smith said the company has cut $600 million in annual costs since 2008, when it was first battered by historically high grain prices. Smith said the cuts put Tyson in a good position to handle higher feed costs predicted for 2011, even as demand for chicken is expected to be flat.
The company expects to cut an additional $200 million in costs this year.
"These operational efficiencies — as we gain, those they stay with us. And they that have become a pretty effective hedge against market conditions," Smith told analysts during a conference call Friday.
Net income climbed to $298 million, or 78 cents per share, in the three months ended Jan. 1. That's up from $160 million, or 42 cents per share, a year earlier.
Even excluding a one-time gain of 3 cents per share related to an asset sale, earnings topped the average forecast from analysts surveyed by FactSet of 62 cents per share. Tyson Foods Inc.'s revenue climbed 15 percent to $7.62 billion. Analysts expected $7.16 billion.
Results improved across all segments, including chicken, beef and pork. The average price of chicken fell less than 1 percent, but that was offset by a 16 percent increase in beef prices and a nearly 24 percent rise in pork prices.
Chicken volume rose 8 percent, beef volume edged up nearly 1 percent and pork volume rose about 6 percent.
In 2011, the company expects its production to increase slightly, but not outpace export growth. That means total U.S. supply should fall slightly, it said, which helps the prices Tyson gets for fresh meat.
Tyson expects chicken production will fall slightly to match supply with customer demand. Smith told analysts during the conference call that Tyson is on track to meet chicken production cuts the company started in November.
Tyson's chicken supply will be aligned with customer demand by March, Smith said. Tyson will likely turn a profit in its chicken segment for the remaining three quarters of 2011, even if the profits aren't as large, Smith said.
Beef supplies will fall 1 percent to 2 percent in fiscal 2011, and pork supply is expected to be even with 2010.
Tyson does not provide specific profit forecasts, but said net income in 2011 should be similar to results in 2010, when the company earned $2.19 a share. Analysts expect net income of only $1.85 a share for the year, according to FactSet.