Tyson Set to Grow Even as Soft Consumer Staples Halts Rally
The optimism portrayed by Tyson Foods Inc. TSN at the Consumer Staples Conference, was offset by disappointing ISM manufacturing report along with lower service-sector index reading and soft jobs data in August. Investors were not very excited about the sector which is why the share price of the company did not rally even after the Springdale, AR-based meat processor stated that the company is on a growth trajectory. In fact share price declined 3.3% after the company reaffirmed its view on Sep 8, 2016.
In the conference held on Sep 8, 2016, Tyson Foods reaffirmed its guidance for fiscal 2016 which was provided at the time of the announcement of its second-quarter results, wherein both the top and bottom lines grew year over year and beat the Zacks Consensus Estimate. The company expects its earnings per share to be 40% higher year over year and achieve a four-year compound annual growth rate of approximately 22%. (Read: Tyson Foods Q3 Earnings and Sales Beat Estimates)
Tyson also stated that it returns cash to its shareholders via share buybacks and dividends. Last year in November, this leading food processor announced a 50% quarterly dividend hike to 15 cents per share. The company also expects to raise the annual dividend beginning fiscal 2017 by 10 cents per year.
TYSON FOODS A Price
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The company anticipates each of its operating segment to operate above its normalized range. Domestic chicken production is expected to go up, although fed cattle and hog supplies are estimated to remain short even in fiscal 2017. However, the company expects the prepared foods segment to benefit from operational improvements and positive pricing.
Tyson is also focused to grow its Core 9 categories - Tyson, Jimmy Dean, Hillshire Farm, BallPark, Wright, Aidells and State Fairbrands. Volumes are expected to rise 4% for the Core 9 categories of the company during fiscal 2016 on the back of significant market share gains.
Tyson’s Zacks Rank #2 (Buy) with a VGM Score of “A” and expected long term earnings growth rate of 11% makes it an attractive investment opportunity. We believe that Tyson continuously innovates and adds new products to the already rich food line-up. Management has put a lot of focus on innovation which is an important part of their growth strategy.
Zacks Rank & Other Stocks to Consider
Tyson sports a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Other players in the broader consumer staples sector worth considering include Cal-Maine Foods Inc. CALM, Hormel Foods Corp. HRL and TreeHouse Foods Inc. THS. All these stocks carry a Zacks Rank #2 (Buy).
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