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Tyson Foods (TSN) Cheers on Robust Chicken & Beef Units

Zacks Equity Research

Tyson Foods, Inc. TSN is a delectable pick for investors, evident from the stock’s rally of 28.5% in the past three months compared with the industry’s rise of 14.9%. This renowned meat products player gains from strong footing in the protein-packed products space as well as lucrative strategies to remain on growth track.

Strength in Protein Packed Food Products Bodes Well

Tyson Foods boasts a rich portfolio of protein packed brands that are growing rapidly across the globe. During the first and the second quarter of fiscal 2019, the company delivered improved sales in the Chicken and Beef categories. Moreover, fiscal 2019, the USDA expects overall domestic protein production (chicken, beef, pork and turkey) to rise roughly 2% year over year. Rising demand for protein-packed food products is a fueling factor for higher protein production.

The company has also acquired a few businesses to bolster offerings, especially in the Chicken segment. Some of the noteworthy buyouts include, Keystone Foods, AdvancePierre, Original Philly Holdings and Hillshire. Apart from this, the company is steadily expanding fresh prepared foods offering, owing to consumers’ rising demand for natural fresh meat offerings without any added hormones or antibiotics. In this respect, the buyout of Tecumseh is quite noteworthy. The company is also exploring opportunities in the alternative sources for meat and protein products.



 

Financial Fitness Program is on Track

Toward the latter half of 2017, Tyson Foods announced a Financial Fitness Program, with the motive to enhance operating and supply-chain efficiencies, reduce overheads and fuel the bottom line. In fact, the company was successful in generating savings worth $253 million in fiscal 2018, higher than the previousgoal of $200 million.  The company aims to generate savings from this program through synergies from acquisition integration along with incremental cost optimization thatinvolves the removal of non-value added costs.

Earlier, management had stated that it expects the program to generate savings worth $400 million by 2019 and $600 million by 2020. Majority of these savings are expected to drivethe Prepared Foods and Chicken segments.

Final Thoughts

Undoubtedly, Tyson Foods’ efforts to build a solid meat products portfolio are yielding results. In fact, the company has undertaken divesture of non-protein businesses (such as Sara Lee Frozen Bakery, Kettle and Van’s) to focus on the growing protein-packed food arena. Also, efforts to boost operational efficiency are encouraging. All said, we expect this Zacks Rank # 2 (Buy) company to continue in investors’ good books.

Interested in Consumer Staples Stocks? Check These

The J. M. Smucker Company SJM with long-term earnings per share (EPS) growth rate of 5.4%, carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Campbell Soup CPB has a long-term EPS growth rate of 6% and currently holds a Zacks Rank #2.

General Mills GIS, also with a Zacks Rank #2, has long-term EPS growth rate of 7%.

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Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
 
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