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Tyson Foods (TSN) Up More Than 20% in 6 Months: Will it Stay?

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Tyson Foods, Inc. TSN has been gaining on strategic growth efforts, including focus on protein-packed brands and capacity expansion endeavors. The company is also benefiting from robust demand in its retail core business lines. Moreover, continued recovery in the foodservice channel led by QSRs is a driver.

These trends were witnessed in fourth-quarter fiscal 2021 results, with the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. The company’s stock has increased 23.8% in the past six months compared with the industry’s growth of 3.9%.

Let’s delve deeper.

Zacks Investment Research
Zacks Investment Research

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Focus on Protein-Packed Brands

Tyson Foods is focused on higher protein production to cater to the rising demand for protein-packed food. For fiscal 2022, the United States Department of Agriculture (“USDA”) projects domestic protein production (beef, pork, chicken and turkey) to improve slightly from fiscal 2021 levels. For fiscal 2022, Tyson Foods expects to grow its total volumes by 2% to 3%, outpacing the overall protein consumption growth. A significant percentage of the volume growth is likely to come from the chicken segment and optimized product portfolio. Enhanced capacities and initiatives to improve operations are likely to boost performance.

Tyson Foods boasts a rich portfolio of protein-packed brands that are growing rapidly across the globe. Additionally, the company has undertaken divesture of non-protein businesses (such as Sara Lee Frozen Bakery, Kettle and Van’s) to focus more on the growing protein-packed food arena. 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.

Tyson Foods has been venturing into alternative sources for meat and protein products. In this regard, the company’s nationwide launch of Raised & Rooted that includes three new products, bodes well amid rising demand for plant-based protein options. In June 2021, Tyson Foods announced that it is rolling out a range of plant-based products in chosen retail markets and digital platforms in the Asia Pacific under the First Pride brand. In January 2021, the company launched new alternative protein offerings under the Jimmy Dean Label.

Measures to Boost Efficiency

Tyson Foods is undertaking a number of operational and supply chain efficiency programs to place itself better for the long run. In this regard, the company is investing in capacity expansion and automation technology investments. In its last earnings call, management highlighted that it is on track to open 12 new plants over the next two years, which will enable it to tackle capacity constraints and growing demand for protein globally. The additional capacities include nine chicken plants, two case-ready beef and pork facilities as well as one bacon unit. Management anticipates capital expenditures of nearly $2 billion during fiscal 2022 to support global protein demand growth.

Wrapping Up

Tyson Foods is under pressure due to incremental expenses associated with COVID-19. It incurred nearly $65 million as pandemic-induced direct incremental costs in fourth-quarter fiscal 2021. Management, in its quarterly earnings call, highlighted that it saw tough availability of labor. The company witnessed inflation across the business, in areas such as wages, grain cost, live animal costs and pork, meat cost and prepared foods as well as freight costs across the enterprise.

That being said, the aforementioned upsides are likely to help the Zacks Rank #3 (Hold) company sustain growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hot Consumer Staples Bets

Some better-ranked stocks are Flower Foods FLO, United Natural Foods UNFI and Medifast MED.

Flower Foods, the producer of packaged bakery foods in the United States, currently sports a Zacks Rank #1. Shares of FLO have increased 16.7% in the past six months.

The Zacks Consensus Estimate for Flower Foods’ 2022 sales suggests growth of 1.9% from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of 15.4%, on average.

United Natural Foods, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, carries a Zacks Rank #2 (Buy) at present. Shares of UNFI have moved up 34% in the past six months.

The Zacks Consensus Estimate for United Natural Foods’ current financialyear earnings per share suggests growth of 7.7% from the year-ago reported number. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

Medifast, the manufacturer of healthy living and other consumable health and nutritional products, currently carries a Zacks Rank of 2. Shares of MED have lost 24% in the past six months.

The Zacks Consensus Estimate for Medifast’s 2022 sales suggests growth of 10% from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.


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