(Bloomberg) -- Tyson Foods Inc. beat earnings estimates with recovering demand from U.S. restaurants and higher prices for beef boosting America’s biggest meat company.

“We delivered a strong performance in a strong protein market,” said Chief Executive Officer Donnie King in a statement. “We continued to build financial strength, reducing our debt and investing in future growth by laying out plans to expand our business, both to address capacity constraints and meet growing demand.”

The Springdale, Arkansas-based company reported adjusted third-quarter earnings per share of $2.70, compared to the average estimate for $1.63. Sales of $12.48 billion compared with estimates for $11.49 billion.

Key Insights

  • The top U.S. meat company by sales has benefited from record-high margins in its beef business, with tight labor markets limiting the amount of cattle moving through slaughterhouses.
  • Tyson last week became one of the first companies to require that all of its employees receive a Covid-19 vaccine. While the delta variant has been spreading in areas of the U.S. South where Tyson has plants, production of meat and poultry hasn’t been significantly impacted.
  • The company’s operating income declined due to higher legal fees, weather and Covid-19-related disruption, and problems with hatching rates in the chicken unit.
  • For fiscal 2021, we estimate that we will incur approximately $325 million of direct incremental expenses associated with the impact of COVID-19; however, some of these incremental expenses may become permanent over time.
  • High grain prices will result in lower chicken results in fiscal 2021 while beef results are expected to improve. Meanwhile, the virus could continue to alter operations, with demand shifting from retail to restaurants.
  • Tyson Chief Executive Officer Donnie King, who was named CEO shortly after the last earnings release, is likely to comment on poultry-production challenges in a call with investors.

Market Reaction

  • Tyson shares have climbed about 10% this year. Shares were up 4.9% before the start of regular trading on Monday.

Get More

  • Click here for more on Tyson’s results.
  • Tyson will host a conference call at 9 a.m. New York time.

(Updates throughout including CEO quote in second paragraph.)

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