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By Tom Polansek
Aug 8 (Reuters) - Tyson Foods Inc said it expected record profits this year and next as its focus on higher-margin packaged products pays off, after low feed and livestock costs helped quarterly earnings smash analysts' estimates on Monday.
Shares of the biggest U.S. meat processor and maker of Ball Park brand hot dogs set an all-time high of $75.46 before paring gains.
The company has benefited as costs for commodities, including cattle, hogs and grains fed to livestock, have fallen due to increased supplies. On a conference call, Tyson Foods Chief Executive Officer Donnie Smith projected feed prices would stay low next year.
"Tyson is firing on all cylinders right now," JP Morgan analyst Ken Goldman said in a note. With corn prices down, "we think the lights will stay on at the party for some time."
Food companies, including Tyson and rivals such as Hormel Foods Corp, are adjusting their product lines as consumers are increasingly buying fresher items and those perceived to be healthier, turning away from processed foods.
Tyson said it may expand into organic chicken in a challenge to privately held Perdue Farms, which says it is the largest U.S. organic-certified chicken producer. This month, it plans to launch a line of frozen chicken products from birds that have never received antibiotics.
Tyson has benefited by shifting its strategy toward selling such "value-added" products, which command higher margins than commodity meats. But some analysts questioned how long the company can differentiate itself in a category that includes pre-diced pork and frozen, individually packaged steaks.
"It seems like it's a lot of products that could be easily duplicated by your competitors," Credit Suisse analyst Robert Moskow said on the conference call with CEO Smith.
Overall, supplies of chicken, beef and pork are expected to rise next year, which could add pressure to meat prices and processors' earnings. Rising consumer demand for protein will offset the increase, however, Stephens analyst Farha Aslam told Reuters.
Tyson said operating margins in the quarter ended July 2 were a record 8.2 percent, up from 5.6 percent a year earlier.
Net income attributable to the company rose to $1.25 per share in the quarter from 83 cents a year earlier. Excluding items, Tyson earned $1.21 per share, beating analysts' estimates of $1.06. Sales fell 6.6 percent to $9.4 billion, above estimates of $9.33 billion.
Tyson raised its full-year adjusted earnings forecast to $4.40-$4.50 per share from $4.20-4.30.
Jefferies, in a note, projected earnings would jump to about $4.72 next year. (Additional reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Alan Crosby and Grant McCool)