U.S. meat producer Tyson Foods Inc reported a higher-than-expected first-quarter profit and predicted even better profit margins for its chicken business.

Its shares rose nearly 6 percent to a 15-month high.

Tyson's beef and pork profits improved from a year ago, helped by cost-cutting efforts and stronger exports. But investors were watching closely for signs of a turnaround in its chicken operations, which have suffered from weak consumer demand and rising feed costs.

The company said its chicken business, the nation's largest, earned $78 million on an operating basis, on a 3.2 percent profit margin, and that those margins should improve.

First thing we have to do is more consistently generate operating margins in that 5 to 7 range, which we should do this year, Chief Executive Donnie Smith told analysts.

Consumers are still worried about the economy and unemployment although our research indicates they're starting to feel a little bit better about their economic situation and aren't hardly as concerned about limiting their restaurants visits, Smith said during the call.

J.P. Morgan analyst Ken Goldman noted that Tyson hadn't posted a first-quarter margin that high in its chicken business since early 2007.

The Springdale, Arkansas-based company reported first-quarter earnings of $160 million, or 42 cents per share, compared with a year-earlier loss of $102 million, or 27 cents per share.

Wall Street analysts, on average, expected a profit of 18 cents, according Thomson Reuters I/B/E/S.

Revenue for the quarter, ended January 2, increased to $6.64 billion from $6.52 billion a year earlier.

In its conference call with analysts, the company estimated full-year revenue at $27.5 billion to $28 billion, up from its previous $27 billion outlook.

STUDYING CHINA DUTIES ON CHICKEN

The surprising results came on the same day that China said it will apply anti-dumping duties to U.S. chicken, claiming U.S. companies sell chicken feet and wings there at below cost.

During the call, Tyson officials said they have not had a chance to study China's action. China said it will apply a 43.1 percent duty on Tyson's chicken, and duties of 64.5 and 80.5 percent on other companies.

Russia has banned U.S. chicken, and Tyson said about 10 percent of its chicken exports last year went to Russia.

Domestic meat sales continue to be hurt by the recession, but Tyson expects some improvement in restaurant sales this year.

While cattle and hog numbers will be smaller in 2010, the company said supplies should be adequate for its plants. Tyson buys the cattle and hogs for its beef and pork operations, but raises its own chickens.

Tyson shares were up 79 cents at $14.78 at the New York Stock Exchange, and peaked at $15.25, the highest since September 2008

(Editing by Derek Caney and Steve Orlofsky)

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