Tyson Foods Inc. (TSN), the largest U.S. meat producer, Monday reported sharply lower quarterly earnings on weakness in its beef operations, but shares rose as the results beat expectations.

Operating earnings in Tyson's beef unit fell 80 percent as high cattle prices hurt margins. Tyson is the largest U.S. producer of beef and chicken and is a major producer of pork.

In August, the company had warned of lower earnings because of losses on grain hedging and weak demand for chicken and beef. Since then chicken sales have improved and grain prices declined, company officials said in a conference call with analysts and reporters.

"The guidance they gave was a little bearish compared to what it actually turned out to be," said Todd Duvick, analyst with Banc of America. "So, I think things look a little brighter both in the near past and in the near future."

For the fiscal fourth quarter ended Oct. 2, profit fell to $66 million, or 19 cents per share, from $147 million, or 42 cents per share, in the year-earlier period.

Wall Street analysts on average expected 16 cents per share, according to Reuters Estimates.

Revenue for the quarter rose to $7.15 billion from $6.57 billion a year earlier.

The Springdale, Ark.-based company also forecast fiscal-year 2005 earnings of $1.15 to $1.45 per share, compared with $1.13 for fiscal 2004. Wall Street estimates averaged $1.28 and ranged from $1.12 to $1.60 a share.

"Margins will continue to be difficult in beef until international market access is restored and live cattle are permitted to come from Canada," Dick Bond, Tyson president, said on the conference call.

Tyson had used Canadian cattle in some plants before the United States banned the cattle after a mad cow case in Canada in May 2003.

Cattle prices have been higher than expected due to strong domestic demand for beef and tight supplies of steers and heifers.

Beef exports, which at one time were about 10 percent of U.S. production, were halted after the sole U.S. case of mad cow disease (search) in December 2003. Some exports have resumed but Japan and other key Asian markets continue to ban the beef.

"While there is a framework of an agreement for the resumption of trade with Japan, it appears to be several months away for trade to resume," said Bond.

Tyson's chicken unit had operating earnings of $98 million, up 85 percent from a year earlier, as higher prices and increased sales volume offset higher feed prices.

The company's pork sector had operating earnings of $23 million, up from $19 million in the prior-year period, helped by an increase in exports, the company said.

In a separate announcement, competitor Smithfield Foods Inc. (SFD), the largest U.S. pork producer and a major beef company, estimated fiscal second-quarter earnings at 50 cents to 52 cents a share, from 29 cents a year ago, due to higher hog prices and improved pork-processing margins.

Smithfield has the largest U.S. hog herd.

Wall Street analysts, on average, had expected Smithfield earnings of 46 cents.

Tyson shares were up 33 cents, or 2 percent, at $17.21 Monday at the New York Stock Exchange.