Tyson, JBS Set for Earnings Spike From Poultry Rebound
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Meat giants are poised for a profit bounce back thanks to a boost from chicken.
Companies including Tyson Foods and JBS SA, which control a sizable chunk of global meat supplies, are set to report a spike in earnings for the quarter ended in June as a rebound in poultry profits counterbalances a downturn in their U.S. beef operations.
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A slump in grain prices has reduced the cost of raising poultry at a time when chicken demand is on the rise, with consumers seeking cheaper alternatives to beef. Supply growth has been kept in check, with U.S. inventories of breast meat, thighs and wings dropping to the lowest levels in years. That’s a remarkable turnaround for suppliers, which last year struggled with expensive feed and an inventory glut.
“The chicken industry is in a good position now,” Justin Sherrard, an analyst at Rabobank, said in an interview.
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The increased optimism is reflected in earnings estimates. Second-quarter profits at Pilgrim’s Pride Corp., the U.S. chicken producer controlled by JBS, is expected to more than triple from a year earlier to the highest in two years, according to the average of analyst projections compiled by Bloomberg. Tyson Foods’ fiscal third-quarter profit is estimated to have jumped fourfold to 67 cents a share, mostly driven by a rebound in its chicken business.
Pilgrim’s Pride is set to disclose its results after the close of markets on July 31, with Tyson’s expected on Aug. 5.
BRF SA, the Brazilian chicken giant controlled by Marfrig Global Foods SA, is seen posting record earnings before items such as interest and taxes, according to estimates compiled by Bloomberg. Earnings at its local rival Seara, which is owned by JBS, are expected to more than triple.
The rebound in chicken profits is a much-needed development for companies that also have beef operations in the U.S., where a shortage of cattle has sent costs soaring. The average price companies such as JBS, Tyson, Cargill Inc. and Marfrig had to pay for slaughter-weight animals in the second quarter rose about 7% from a year earlier to a seasonal record. Meanwhile, beef production was nearly unchanged, according to U.S. Department of Agriculture data.
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Tyson Foods is poised to report a third straight quarter of operating losses excluding some items at its beef business, according to the Bloomberg consensus. Meanwhile, JBS’s North America beef division is seen reporting a 78% drop in earnings, based on a JPMorgan Chase & Co. projection.
While beef supplies are tight in the U.S., production is booming in Brazil and Australia, which should help lift profits for JBS. Export revenue in Brazil, the world’s largest beef exporter, rose by 17% in the second quarter from a year earlier as higher volumes more than offset a decline in prices.
JBS posts earnings on Aug. 13, while BRF and Marfrig will release their results on Aug. 14.
