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Tyson Foods' Deal With Grupo Vibra Likely to Fuel Expansion

Zacks Equity Research

Tyson Foods, Inc. TSN is committed toward expanding presence in the global markets, evident from its latest agreement to invest in the foods segment of Brazil’s Grupo Vibra (“Vibra Foods”). Investment in this provider and exporter of poultry products will give Tyson Foods access to Brazilian poultry supplies and help it expand global reach.

Presently, the company is focusing on expanding operations outside the United States, where it expects about 98% rise in protein consumption over the next five years. In fact, it is currently delivering international sales of about $7 billion annually, including U.S. export sales of roughly $5 billion and in-country revenues worth approximately $2 billion.

Thus investment in Grupo Vibra seems appropriate, as it will help Tyson Foods cater to the rising demand in Brazil as well as in other core regions like Asia, the Middle East and Europe. As part of the deal, Grupo Vibra will spin-off Agrogen (its genetics multiplication business) into a different entity. Also, the contract is subject to authorization from Brazilian regulators. 

Tyson Foods’ Focus on Expansion Intact

Tyson Foods has long been focused on expansion through investments and buyouts, given the burgeoning demand for protein. Evidently, the company completed the acquisition of the European and Thai operations of BRF S.A. in June 2019. This buyout is likely to strengthen its footing in the Thai poultry space and expand presence in the U.K. and Netherlands.

On Nov 30, 2018, the company completed the acquisition of the Keystone Foods business, which supplies a variety of meat and chicken products internationally. This buyout has particularly been bolstering the company’s Chicken and Other segments' performance.

Other notable acquisitions of Tyson Foods in the past include AdvancePierre, Original Philly Holdings, Hillshire and the Mexican food restaurant chain, Don Julio Foods. Moreover, the company acquired poultry rendering and blending assets of AMPRO Products, Inc. and American Proteins, Inc. The deal enabled Tyson Foods to bolster animal products recycling capabilities, which will aid in expanding the animal feed business.

This apart, Tyson Foods divested the non-protein businesses (such as Sara Lee Frozen Bakery, Kettle and Van’s) to focus more on the growing protein-packed food arena. Additionally, the company has been venturing into alternative sources for meat and protein products, evident from the investment in Memphis Meats. Further, it is on track with new plant-based protein and blended product launches under the Raised & Rooted brand.

Clearly, the investment in Grupo Vibra appears to be a deemed fit. Such efforts to drive growth have helped this Zacks Rank #3 (Hold) stock rally as much as 76.8% this year, crushing the industry’s growth of 41.6%.

Check These Solid Food Stocks

General Mills GIS, with a Zacks Rank #2 (Buy), has a long-term EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MEDIFAST MED, also with a Zacks Rank #2, has delivered positive earnings surprise in the trailing three quarters.

J&J Snack Foods JJSF, with a Zacks Rank #2, has an impressive earnings surprise record.

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