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Why Did Tyson Foods Fire Some of Its Workers?

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Aug. 12 2016, Published 1:37 p.m. ET

Price movement

Tyson Foods (TSN) has a market cap of $27.6 billion. It fell by 0.09% to close at $74.57 per share on August 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 1.4%, 7.7%, and 40.5%, respectively, on the same day. TSN is trading 2.8% above its 20-day moving average, 10.8% above its 50-day moving average, and 23.4% above its 200-day moving average.

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Related ETFs and peers

The iShares Morningstar Mid Core ETF (JKG) invests 1.3% of its holdings in Tyson Foods. The ETF tracks a market-cap-weighted index of US midcap companies that exhibit both growth and value characteristics as determined by a multifactor selection. The YTD price movement of JKG was 10.3% on August 11.

The Consumer Staples Select Sector SPDR ETF (XLP) invests 1.5% of its holdings in Tyson Foods. The ETF tracks a market-cap-weighted index of consumer staples stocks drawn from the S&P 500.

The market caps of Tyson Foods’ competitors are as follows:

  • Hormel Foods (HRL) — $19.6 billion
  • Pilgrim’s Pride (PPC) — $5.7 billion
  • Sanderson Farms (SAFM) — $2.0 billion

Latest news on Tyson Foods

In a press release on August 11, 2016, Reuters reported, “Tyson Foods Inc said it has fired 10 workers who were captured abusing breeder chickens in Virginia in a secretly recorded video released by an animal rights group on Thursday. The company also said it will retrain workers who handle live poultry on animal welfare policies after the latest instances of abuse came to light.”

It added that “Tyson said it believed it had not gone far enough to stop the mistreatment of animals at its facilities and was evaluating other steps to ensure its policies were being followed.”

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Performance of Tyson Foods in fiscal 3Q16

Tyson Foods reported fiscal 3Q16 sales of $9.4 billion, a fall of 6.9% from the sales of $10.1 billion in fiscal 3Q15. Sales of the chicken, beef, and prepared foods segments fell by 0.51%, 12.1%, and 0.06%, respectively. On the other hand, sales of the pork segment rose by 5.3% between fiscals 3Q15 and 3Q16. The company’s gross profit margin and operating income rose by 33.0% and 36.2%, respectively.

Its net income and EPS (earnings per share) rose to $484.0 million and $1.25, respectively, in fiscal 3Q16, compared with $343.0 million and $0.83, respectively, in fiscal 3Q15. It reported adjusted EPS of $1.21 in fiscal 3Q16, a rise of 51.3% from fiscal 3Q15.

TSN’s cash and cash equivalents fell by 71.4%, and its inventories rose by 1.4% between fiscals 4Q15 and 3Q16. Its current ratio rose to 1.8x and its debt-to-equity ratio fell to 1.3x in fiscal 3Q16, compared with 1.5x and 1.4x, respectively, in fiscal 4Q15.

Quarterly dividend

Tyson Foods declared a quarterly dividend of $0.15 per share on its Class A common stock and $0.14 per share on its Class B common stock. The dividends will be paid on December 15, 2016, to shareholders of record at the close of business on December 1, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • sales of ~$37 billion
  • capital expenditures of ~$725 million
  • net interest expense of ~$245 million
  • adjusted EPS in the range of $4.40 to $4.50
  • chicken segment operating margin of more than 12%
  • beef segment operating margin in the range of 1.5%–3.0%
  • pork segment operating margin of more than 10%
  • prepared foods segment operating margin at the low end of 10%–12%

The company has made the following projections for fiscal 2017:

  • sales growth of 1%
  • interest expense of $225 million
  • pork segment operating margin above 6%–8%

In the next part, we’ll take a look at General Mills (GIS).

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