By Sruthi Ramakrishnan
(Reuters) - Tyson Foods Inc (N:TSN), the biggest U.S. meat processor, raised its full-year profit forecast, helped by a sharp drop in feed and livestock costs, sending its shares to a record high on Friday.
Shares of the company, which also reported a better-than-expected rise in quarterly profit, were up 12 percent at $58.15 in morning trading.
Feed costs have fallen in the United States as a global glut of corn and soybeans has kept grain prices depressed for three straight years.
However, Tyson's revenue fell 15.4 percent to $9.15 billion as higher domestic availability of cattle and hogs drove down average sales prices in the first quarter.
Retail U.S. beef prices declined seven months in a row till December as healthy pastures, cheaper corn and record high cattle prices a year ago encouraged ranchers to bolster their herds.
Cattle herds are also recovering after years of drought reduced supplies, which had fallen to a 63-year low in 2014.
"The worst is over in terms of the cattle supply," Tyson's Chief Executive Donnie Smith said on a conference call.
Tyson's beef business, its largest by sales, reported an operating profit of $71 million, compared with a loss of $6 million in the year-earlier period, due to lower livestock costs.
Operating margin in its chicken business also rose, helped by a $60 million drop in feed costs.
"We were particularly impressed by the 13.6 percent EBIT margins in the Chicken segment given the margin compression the chicken industry has experienced recently," Jefferies & Co analyst Akshay Jagdale wrote in a note.
Tyson's rivals Sanderson Farms Inc (O:SAFM) and Pilgrims Pride Corp (O:PPC) are also expected to benefit from lower feed costs. Their shares were up as much as 3.5 percent on Friday.
Tyson's cost of goods sold fell nearly 20 percent to $7.95 billion in the first quarter ended Jan. 2.
Net income attributable to Tyson rose 49 percent to $461 million, or $1.15 per share, handily beating analysts estimates of 89 cents per share, according to Thomson Reuters I/B/E/S.
The company said it expected adjusted earnings of $3.85- $3.95 per share for the year ending September, up from its previous forecast of $3.50-$3.65.
However, Tyson, which will also hold its annual shareholder meeting on Friday, cut its full-year sales forecast to about $37 billion from about $41 billion.