Tyson Foods (TSN) and Post (POST) are learning it pays to go lean.
Shares surged Friday morning, up 12.5% and 13%, respectively, as both companies crushed Wall Street earnings estimates despite posting meager sales.
Investors were also delighted to see profitability at both companies lifted by the steady decline in commodity cost inputs. Cattle and USDA pork belly futures are down 8% and 25% respectively over the past six months, while corn and wheat futures are down 11% and 10% over the period, based on Bloomberg pricing data.
Tyson, the Springdale, Ark.-based chicken distributor, booked $1.15 earnings per share for its fiscal first quarter, topping Wall Street estimates by 29%, despite reporting sales of just $9.2 billion (8.5% below analyst forecasts), based on Bloomberg consensus data.
The company managed to pull off its big gains Friday primarily by trimming costs, with CEO Donald Smith touting a variety of initiatives on a morning call with analysts.
"Fiscal 2016 is off to a great start with record EPS of $1.15 up 49%," he said. "For the balance of fiscal 2016, we anticipate continued savings and raw materials as well as synergy captures and will invest a good portion of the savings into pricing innovation and brand building; our margin outlook for prepared foods is at the low end of the 10% to 12% range."
Smith also pointed to record operating income generated by its popular chicken segment.
Post jumped in line with Tyson, as its CEO Robert Vitale raised annual guidance off its strong earnings beat.
"We had a terrific quarter," he said on a morning earnings call. 'Our adjusted EBITDA performance was strong for each of our segments." EBITDA is a standard valuation metric based on earnings before interest, taxes, depreciation and amortisation.
"On the consolidated basis, revenue was $1.2 billion, and adjusted EBITDA was $235.6 million," he continued. "This performance, combined with our expectations for the remainder of the year, has prompted us to raise our annual guidance."
The St. Louis, Miss.-based cereal producer also trumped its fiscal first quarter earnings per share estimates by 64%, despite a revenue miss of 4.5%, based on Bloomberg data. (Adjusted earnings per share clocked in at $0.52 on sales of $1.2 billion).
