By Tom Polansek and Granth Vanaik
(Reuters) -Tyson Foods surpassed Wall Street expectations for third-quarter revenue and profit on Monday as meat sales rebounded and low grain prices reduced feed costs for chickens.
Shares rose 2.8% while the broader stock market weakened.
Increased profits in the chicken business come after Tyson, the biggest U.S. meatpacker by sales, struggled for years to turn the unit around and turned to plant closures and layoffs. The company grappled with excess supplies in 2023 after struggling to predict demand.
Tight U.S. cattle supplies are squeezing Tyson's beef business, its largest unit. However, an improved outlook for chicken drove the company to narrow its total adjusted operating income forecast for fiscal year 2024 to $1.6 billion to $1.8 billion from $1.4 billion to $1.8 billion.
Tyson said it is working to better align chicken supplies with customer demand, after previously reporting it lowered production to match supplies with demand.
"We haven't called a different play. We've just executed it faster than I expected," Wes Morris, president of Tyson's poultry business, told analysts.
Tyson's total net sales rose 1.6% to $13.35 billion in the quarter, compared with analysts' estimates of $13.24 billion, according to LSEG data. Adjusted earnings of 87 cents per share topped estimates of 65 cents.
The quarter was solid, with "the important chicken segment doing very well versus expectations," JP Morgan said.
The chicken unit's adjusted operating income rose to $307 million from a loss of $63 million a year ago, as Tyson said it had better success keeping birds alive until slaughter. With grain prices near four-year lows, animal feed costs slumped by $305 million.
Tyson raised its estimate for the unit's adjusted annual income for the third consecutive quarter.
"Operational improvements we've been driving are enabling us to benefit from the market tailwinds," CEO Donnie King said.
Since 2023, Tyson has sold off a poultry facility, shuttered six U.S. chicken plants and a pork plant, and eliminated jobs to grow profit margins.
In beef, Tyson projected it will suffer an adjusted operating loss of $300 million to $400 million in fiscal 2024, compared to its previous forecast for a $100 million to $400 million loss.
The company reported cattle costs rose about $240 million during the quarter. Ranchers are not significantly rebuilding the U.S. herd they slashed in recent years due to drought and lofty feed costs, King said.