Tyson Foods profit beats estimates on strength in chicken business

* Firm reaffirms annual sales outlook; raises adjusted operating income forecast

* Q2 beef sales volumes down 13.1%, while prices up 11.5%

* Q2 chicken volumes up 1.7%

May 4 (Reuters) - Tyson Foods (TSN) reported better-than-expected quarterly earnings on Monday, as rising chicken sales helped counter a sharp drop in demand for high-priced beef.

Protein-hungry consumers have shifted toward buying more affordable types of meat, such as chicken and pork, as beef prices have set records.

Tyson's beef segment continues to struggle as years of drought reduced U.S. cattle herds and drove up livestock costs.

Tight supplies have pushed up beef prices, straining consumers, and squeezing processor margins as rising livestock costs outpace gains from higher selling prices.

The company expects an adjusted operating loss of $350 million to $500 million in its beef business during fiscal 2026, compared with a loss of $250 million to $500 million forecast earlier.

Beef sales volumes sank 13.1% for the second quarter, while prices climbed 11.5%.

The unit posted an adjusted operating loss of $202 million, compared with a loss of $113 million a year earlier, while its adjusted operating margin fell 3.9%. Revenue rose slightly, helped by pricing.

In November, U.S. President Donald Trump accused meat-packing companies of driving up beef prices through manipulation and collusion and ordered the Department of Justice to investigate.

Tyson raised its fiscal 2026 income forecast for chicken business to $1.9 billion to $2.05 billion, from $1.65 billion to $1.9 billion projected earlier.

Quarterly chicken volumes rose 1.7%, while adjusted operating margin climbed 12.2%.

Tyson posted adjusted earnings of 87 cents per share for the second quarter, topping analysts' average estimate of 78 cents, according to data compiled by LSEG.

Company-wide quarterly sales increased 4.4% to $13.65 billion, edging past analysts' estimate of $13.61 billion.

The Springdale, Arkansas-based company reaffirmed its annual sales outlook, but raised adjusted operating income forecast to $2.2 billion to $2.4 billion, from a prior projection of $2.1 billion to $2.3 billion. (Reporting by Tom Polansek in Chicago and Neil J Kanatt in Bengaluru; Editing by Shilpi Majumdar)