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Tyson Recalls E Coli Infected Beef

TSN PPC

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Tyson Fresh Meats Inc. (TSN - Analyst Report) has ordered a massive recall of more than 131,300 pounds of ground beef products on the grounds of possible E. coli O157:H7 contamination.

The U.S. Department of Agriculture's Food Safety and Inspection Service (FSIS) announced the recall and also revealed that it was notified of the matter by the Ohio Department of Health of E. coli 0157:H7 illnesses in Butler County. FSIS carried on an investigation by collecting leftover ground beef from the patients' homes which tested positive for E. coli O157:H7 by the Ohio Department of Agriculture's laboratory.

The contaminated food can cause bloody diarrhea, dehydration and in the most severe cases, kidney failure. People with weak immune systems are the most susceptible to food borne illnesses.

FSIS has requested consumers to cook their frozen foods safely and prepare their raw meat products, including fresh and frozen, and only consume ground beef that has been cooked to a temperature of 160° F. Individuals concerned have been advised to contact a health care provider.

The U.S. Department of Agriculture routinely conducts recall effectiveness checks to verify that recalling firms notify their customers of the recall and that steps are taken to make certain that the product is no longer available to consumers.

Very recently the regulatory body issued a Class I recall for 40,000 pounds of ground beef product on grounds of possible E. coli contamination. The meat was intended for school lunches in six school districts in Georgia and distributed by Palo Duro Meat, a company based in Amarillo, Texas.

Tyson Foodsreported its third-quarter 2011 adjusted earnings of 56 cents a share, surpassing the Zacks Consensus Estimate of 40 cents. Profits were driven by higher sales as well as strong performance in all its segments, particularly Beef and Pork.

Tyson believes that the fundamentals of the Beef, Pork and Prepared Foods businesses will remain strong in the fourth quarter of 2011, while it expects weak market pricing conditions to continue in its Chicken segment due to a demand-supply imbalance.

Going ahead in fiscal 2012, Tyson anticipates export sales to continue, resulting in a slight decline in total domestic availability of protein. In the Chicken segment, the company forecasts a slight decline in the industry production, whereas it expects increased raw material costs in the Prepared Foods segment, which will however be offset by the operational improvements and increased pricing.

Tyson also anticipates strong fundamentals in the Beef segment, and expects strong export sales to continue in the Pork segment.

We are encouraged by Tyson Foods’ significant presence in the international market. The company is vertically integrated and has advanced processing capabilities. However, the company faces stiff competition from both national and regional players like Smithfield Foods Inc. and Pilgrim's Pride Corporation (PPC - Snapshot Report).

We currently have a Zacks #3 Rank on Tyson, which translates into a short-term Hold rating. On a long-term basis, we provide a Neutral recommendation on the stock.

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