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Point72 raises its position in Tyson Foods, Inc.

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Dec. 18 2014, Published 3:31 p.m. ET

Point72 and Tyson Foods, Inc.

Point72 Asset Management increased its positions in Tyson Foods, Inc. (TSN), Canadian Natural Resources (CNQ), and Anadarko Petroleum Corp. (APC). The fund reduced its stake in Whiting Petroleum Corp. (WLL) and Baker Hughes Inc. (BHI).

Point72 increased its stake in Tyson Foods, Inc. in the third quarter. The position accounts for 2.20% of the total portfolio—up from 0.59% of the fund’s 2Q14 portfolio.

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About Tyson Foods, Inc.

TSN has its headquarters in Springdale, Arkansas. It processes and markets chicken, beef, and pork. It’s the second largest food production company in the Fortune 500. The company provides products and services to customers throughout the US. It provides its products to ~130 countries. It operates in five segments:

  1. Chicken
  2. Beef
  3. Pork
  4. Prepared Foods
  5. International

Fourth quarter results beat analysts’ estimates

TSN reported revenue of $10.1 billion. This was an increase of 14%—compared to 4Q13. Adjusted operating income increased 13% to $469 million—compared to the same period last year. Adjusted EPS, or earnings per share, increased 24% to $0.87—compared to $0.70 last year.

  • Chicken reported sales of $2.7 billion—compared to $2.8 billion in 4Q13. The sales volume increased by 2.3% as a result of stronger demand for chicken products and a mix of rendered product sales. The average price decreased by 4% as feed ingredient costs declined. This was partially offset by mix changes.
  • Beef sales were $4.4 billion—compared to $3.7 billion in 4Q13. The sales volume declined by 2.6% due to a reduction in live cattle processed. The average price increased by 21.5% due to lower domestic availability of beef products.
  • Pork revenue was $1.6 billion—compared to $1.4 billion for the same quarter last year. The sales volume declined by 0.3% as a result of balancing supply with consumption and reduced exports. The average price was up by 16.5% due to lower total pork supplies. This resulted in higher input costs.
  • Prepared Foods’ revenue was $1.2 billion—compared to $881 million in 4Q13. The sales volume was up 25.5% due to improved demand and incremental volumes as a result of the acquisition of Hillshire Brands (HSH). TSN acquired HSH on August 28, 2014. The average price increased 13.9% due to price increases associated with higher input costs and a better product mix as a result of the acquisition.
  • The International segment reported revenue of $361 million—compared to $323 million in 4Q13. The sales volume was up 7.3% because TSN grew its businesses in Brazil and China. The average price was up 4.2% due to a better pricing environment in Mexico.
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Fiscal year 2014 results

TSN recorded $37.6 billion in revenue for fiscal year 2014. This was a 9% increase—compared to 2013. Net income was $864 million. This was an EPS of $2.94. The EPS was 30% higher than last year. The adjusted operating income was $1.65 billion—a 20% increase from last year.

Strong outlook for fiscal year 2015

TSN is expecting more growth and increased profitability for its Chicken and Prepared Foods segments. The Chicken segment is expected to generate more than a 10% return on sales for fiscal year 2015. The Prepared Foods segment expects to meet the synergy target of $225 million or more for fiscal year 2015. It expects to reach the target because of its acquisition of HSH. Its projected adjusted earnings for the year are $3.30–3.40 per share.

You can read more about Tyson Foods in Your In-Depth Company Overview of Tyson Foods.

In the next part of this series, we’ll discuss Point72’s increased position in CNQ.

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