Tyson Foods stock fell nearly 5% on Monday after executives said the demand for chicken took a “hit in the mouth,” with excess beef and pork supplies in the United States limiting demand for chicken.
The company missed analysts’ consensus earnings estimates in the first quarter, causing the shares to drop quickly in the immediate aftermath of the news.
Tyson Foods was forced to sell chicken at cheaper prices when meat supplies came in higher than the company expected, according to Reuters. Its adjusted operating income on its chicken business fell 34% year-over-year.
“We have been expecting beef to come under pressure for some time. With higher cattle prices, we expected (the) overall harvest to slow down, but that hasn’t happened yet,” Tyson CEO Donnie King said on the earnings call.
A drought in the western United States drove ranchers to reduce their herds, causing a temporary increase in beef production.
“There was more chicken, beef, and pork in the market than anticipated. So, it sounds like a lot of excuses there. I get that.” King added.
Tyson also battled an excess domestic supply of chicken after suffering the worst-ever U.S. outbreak of bird flu, creating export restrictions for its product. The company’s first-quarter adjusted operating income was down 68.3% from a year ago, according to Talk Business.
“We got hit in the mouth in Q1 because of all the protein on the market,” King said on the call.
Tyson’s earnings came in at 85 cents per share, missing estimates by 49 cents. The company also reduced its operating margins outlook for the year from 2% to 4%, down from the 6% to 8% guidance the company issued in the previous quarter. Tyson maintained its full-year revenue guidance of $55 billion to $57 billion.
“This is the first time I’ve seen all markets work against us, all at the same time,” King added.