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Tyson Foods Looks Appealing on Strong Beef & Chicken Units

Zacks Equity Research

With strong protein-packed brands, Tyson Foods, Inc. TSN has been able to maintain strong footing in the food space. Moreover, prudent efforts such as acquisitions and efficiency-building programs have made the company a delectable pick. Well, this Zacks Rank #2 (Buy) stock has rallied almost 31.2% in the past three months compared with the industry’s rise of 13%. Let’s take a look at the factors driving this renowned meat products player.

Rising Protein Demand Aids Growth

For fiscal 2019, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to rise roughly 2% year over year. The rising demand for protein-packed food products is a fueling factor for higher protein production. In fact, Tyson Foods boasts a rich portfolio of protein packed brands that are growing rapidly across the globe. Incidentally, during the first and the second quarter of fiscal 2019, the company delivered improved sales in the Chicken and Beef categories. Additionally, the company has undertaken divestiture of non-protein businesses — Sara Lee Frozen Bakery, Kettle and Van’s — to focus on the growing protein-packed food arena.



 

Prudent Buyouts Strengthen Offerings

Tyson Foods is focusing on acquisitions to expand portfolio and boost sales volumes. In particular, acquisitions are aiding growth in the Chicken segment. Incidentally, sales volume in the unit advanced 15.1% year on year during the second quarter of fiscal 2019. We note that on Feb 6, 2019, the company announced a deal to acquire the European and Thai operations of BRF S.A. for approximately $340 million in cash. On Nov 30, 2018, the company acquired Keystone Foods business, which supplies a broad array of meat and chicken products across the globe. The buyout has been bolstering performance in the Chicken and Other segment. Notable acquisitions include — AdvancePierre, Original Philly Holdings and Hillshire amongst others.

Apart from this, the company is steadily expanding fresh prepared foods offering, owing to consumers’ rising demand for natural meat offerings without added hormones or antibiotics. In this respect, the buyout of Tecumseh is quite noteworthy. The deal has added the popular air-chilled Smart Chicken brand along with a variety of chicken sausages, fresh and deli-style chicken to Tyson Foods’ portfolio. Moreover, Tyson Foods’ investments in Beyond Meat and Memphis Meats indicate the company’s interests in alternative sources of protein.

Wrapping Up

Clearly, Tyson Foods’ sturdy efforts to build a solid meat products portfolio are yielding results. Moreover, the company is on track with the Financial Fitness Program to enhance supply chain efficiencies and reduce overhead costs. All said, we expect the company to continue in investors good books.

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