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By Tom Polansek, Neil J Kanatt, Heather Schlitz
(Reuters) -U.S. meatpacker Tyson Foods raised its annual sales forecast on Monday as strong demand for beef and chicken helped it exceed first-quarter results estimates, lifting shares 2.3%.
The chicken nuggets and Ball Park hot dogs manufacturer has improved its poultry business after struggling to predict demand and shuttering plants that employed thousands of workers.
A gradual recovery in restaurant traffic is helping revive Tyson's wholesale supply to fast-food and fine-dining chains, while sustained eat-at-home trends have supported demand.
However, it faces threats from tariffs that U.S. President Donald Trump has imposed on Mexico, Canada and China, as well as tight supplies of U.S. cattle.
Tyson considered tariff risks when it lifted its annual adjusted operating income forecast range to between $1.9 billion and $2.3 billion, from $1.8 billion to $2.2 billion expected earlier, CEO Donnie King told analysts on a call.
The company, which benefits from relatively cheap costs for U.S. corn and soy used to feed chickens, now expects fiscal 2025 sales to be flat to up 1%, compared with flat to down 1%.
Tyson has done contingency planning for sales of U.S. pork and chicken to Mexico due to concerns over Trump's tariffs, and it looks for the best markets for its products, King said.
"We've been preparing for this," he said.
Trump's 25% tariffs on Canada and Mexico and 10% tariffs on China could help keep grain costs low by triggering retaliation that reduces global demand for U.S. crops, analysts said.
However, the duties could further increase record prices for cattle processed by Tyson. Tit-for-tat tariffs could also hurt demand for Tyson's meat as Mexico is the biggest export market for U.S. pork, analysts said.
Sales in Tyson's beef unit, its biggest business, rose 6.2% in the first quarter ended Dec. 28. Sales volumes rose 5.6% as cattle are being raised to heavier weights.
Farmers are not starting to rebuild their herds by keeping female cows, known as heifers, on their ranches to reproduce, government data indicates.
"Heifer retention remains frustratingly low, which likely portends beef segment challenges for longer than expected," JP Morgan analysts said.
On an adjusted basis, Tyson earned $1.14 per share, compared with estimates of 88 cents.
(Reporting by Neil J Kanatt in Bengaluru and Tom Polansek and Heather Schlitz in Chicago; Editing by Devika Syamnath, Alexander Smith and Nick Zieminski)