Tyson erratic chicken dance. Problems in the Hen House $TSN

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Tyson Foods (NYSE:TSN) posted ugly Q4 numbers because of problems in the hen-house. Commodity input costs soared and could not be passed on. Like that’s a negative spread.

Donnie Smith, Tyson’s president and chief executive officer after identifying $675 million in unexpected feed costs was quoted as saying

“This is a testament to our quality, service and innovation and our focus on business fundamentals and operational efficiencies across all segments of our business.”

The same Donnie Smith is on the record in the last conference call identifying the Hen House as a problem. But it was profitable. Just profitable by a whisker. He also points out that in Q1 the hen-house is profitable as well.

OK so we know the hen-house is a tough business. It looks like they bit the bullet and had sudden unexpected costs. It looks like they shifted costs forward to get some of the problems behind them. It looks like they were awarding executive stock options and could use a lower price at year-end. They are openly hoping for higher protein prices this coming year. They claim the hen-house is already profitable in Q1.

That’s the set up. They are reminding investors  that this is still the second highest EPS, so it’s not so bad right. Commodity costs are volatile. Just try to follow the trading action in the pits in Chicago. If a few costs were shifted forward you will get a short-term pop and then the fundamentals start to catch up with you. Not to mention  how to get decent comparables going forward. The fox will be in the hen-house soon.

George Gutowski writes from caveat emptor perspective.

Related articles

• Tyson Foods 4Q profit falls on higher costs (seattletimes.nwsource.com)
• Tyson Foods profit hit by higher grain, feed costs (theglobeandmail.com)
• Checking the Quality of Tyson Foods’ Growth (dailyfinance.com)