Tyson Foods Hits 52-Wk High on Solid Q1

Zacks Equity Research

Shares of the leading meat processor, Tyson Foods, Inc. (TSN) reached a new 52-week high of $38.25 on Friday, Jan 31, 2014, following solid first-quarter results and an optimistic outlook for fiscal 2014.

The closing price of this meat processing company on Jan 31 was $37.40, yielding a year-to-date return of 12.8%.

Share Price Drivers

Tyson Foods made a solid start to fiscal 2014 with a decent top-line increase in the first-quarter 2014. Adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate of 66 cents by 9.1%. Quarterly earnings also increased 50% from the prior-year earnings of 48 cents. Strong sales in all the business segments helped the company boost earnings during the quarter.

For fiscal 2014, Tyson expects domestic chicken production to go up, although fed cattle and hog supplies are expected to remain short even in the upcoming year. However, the company expects the prepared foods segment to benefit from operational improvements and positive pricing.

For fiscal 2014, Tyson expects sales to be around $36 billion, up 5% over fiscal 2013 backed by strong demand for the company’s products. Sales were  much ahead of the Zacks Consensus Estimate of $34.4 billion. Moreover, Tyson expects earnings per share in fiscal 2014 to be up 23% compared to the previous year. The company is confident of achieving at least 10% earnings growth in fiscal 2015.

Moreover, the company took over Warren, MI-based pizza maker Bosco's Pizza Company on Jan 18, 2014, which is expected to boost earnings in the coming quarters.

Investors believe that the acquisition was a strategic move as Tyson is aiming to grow its presence in the prepared foods sector like chicken nuggets, chicken sandwiches, wings, meatball sandwiches and bone-in chicken which have been witnessing growth for the past few years due to a change in consumers’ tastes.

Tyson has a Zacks Rank #2 (Buy). Other stocks in the retail sector worth considering include Hormel Foods Corp. (HRL), Con Agra Foods Inc. (CAG) and Green Mountain Coffee Roasters Inc. (GMCR). All these stocks carry a Zacks Rank #2 (Buy).

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