By Gerson Freitas Jr.

Tyson Foods Inc. signaled 2024 results that trailed analysts’ estimates and wrote down the value of its investments in beef amid a challenging economic backdrop, tighter cattle supplies and higher costs.

Sales of the largest US meat producer should remain relatively flat in the fiscal year that started in October, while operating income is expected to fall short of the $1.6 billion average of analyst estimates compiled by Bloomberg, the company said in a statement. The meatpacker reported quarterly adjusted earnings of 37 cents per share, down 77% from a year earlier, as it recorded a goodwill impairment charge of $333 million in its beef segment. The profit was still above the 25-cent average of analyst estimates compiled by Bloomberg.

The beef segment, Tyson’s largest, swung to a loss in the three months through September — the first since 2015, according to data compiled by Bloomberg — amid a decline in volumes, and should continue to struggle in 2024. There’s less cattle available in the US for companies such as Tyson to slaughter and process into beef as the nation’s herd has shrunk to the smallest in almost a decade. Meanwhile, the cost of buying fattened animals is on track for its third straight annual increase, with beef wholesale prices lagging, which has eroded meatpackers’ profits. 

The segment’s goodwill impairment was mostly driven by an unfavorable macroeconomic environment which includes higher interest rates, according to Chief Financial Officer John Tyson.

Read more: Tyson Foods to Shut More US Chicken Plants as Profit Plunges (2)

In a conference call with investors, the company indicated that its beef operations should remain challenged until ranchers begin to replenish their herds, which may take longer than initially expected. Tyson projected a loss of as much as $400 million for its beef operations in 2024, with pork close to breaking even.

The Springdale, Arkansas-based company saw operating losses across its beef, chicken and pork businesses in the fourth quarter. Chicken prices slumped 9.2% from a year ago, more than offsetting a slight increase in volumes. The pork operation struggled with a contraction in both prices and volumes. Those losses were partially offset by higher profits from the the company’s prepared food segment.

For 2024, Tyson expects its chicken business to reverse 2023 losses and post adjusted operating income of as much as $700 million. Its prepared foods segment is expected to make a profit of as much as $1 billion.

“We see those businesses progressing in the right direction and we expect that to be positive and enable Tyson to be free cash flow positive in 2024,” John Tyson said.

Tyson this year announced the shutdown of six chicken plants in Indiana, Virginia, Arkansas and Missouri, affecting about 4,700 jobs, as part of efforts to streamline its operations. The company has also cut an unspecified number of workers at a North Carolina poultry site. In its latest move last week, the meatpacker unveiled plans to shut down two beef and pork case-ready plants in Florida and South Carolina.

The overhaul has been gradually translating into better results, according to the CFO.

“We are starting to see the improvements in our chicken business associated with some of the choices and the moves that we made last year,” Tyson said in an interview. Meanwhile, the company continues to look into alternatives to boost efficiencies across all its operations. “We have said all options are on the table. I think that continues to be the case as of today.”  

Shares slid 0.6% as of 11:09 a.m. in New York.

(Updates with company comments starting in fifth paragraph)

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