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Tyson (TSN) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research
Honeywell (HON) is at a 52-week high, but can investors hope for more gains in the future? We take a look at the company's fundamentals for clues.

Have you been paying attention to shares of Tyson Foods (TSN)? Shares have been on the move with the stock up 9.4% over the past month. The stock hit a new 52-week high of $77.47 in the previous session. Tyson Foods has gained 44.3% since the start of the year compared to the 16.3% move for the Zacks Consumer Staples sector and the 24.4% return for the Zacks Food - Meat Products industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 6, 2019, Tyson reported EPS of $1.2 versus consensus estimate of $1.12.

For the current fiscal year, Tyson is expected to post earnings of $5.99 per share on $42.76 billion in revenues. This represents a -2.76% change in EPS on a 6.77% change in revenues. For the next fiscal year, the company is expected to earn $6.5 per share on $44.48 billion in revenues. This represents a year-over-year change of 8.55% and 4.01%, respectively.

Valuation Metrics

Tyson may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Tyson has a Value Score of A. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 12.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 8.8X versus its peer group's average of 8.8X. Additionally, the stock has a PEG ratio of 1.43. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Tyson currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Tyson meets the list of requirements. Thus, it seems as though Tyson shares could have a bit more room to run in the near term.



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