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Tyson Foods Reaffirms Its 2016 Projections

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Price movement

Tyson Foods (TSN) has a market cap of $27.1 billion. It fell by 0.77% to close at $74.70 per share on September 8, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.2%, 0.51%, and 41.0%, respectively, on the same day. TSN is trading 0.59% below its 20-day moving average, 3.4% above its 50-day moving average, and 18.1% 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 mid-cap companies that exhibit both growth and value characteristics as determined by multifactor selection. The YTD price movement of JKG was 10.2% on September 8.

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) — $19.8 billion
  • Pilgrim’s Pride (PPC) — $5.7 billion
  • Sanderson Farms (SAFM) — $2.1 billion

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.

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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

Tyson Foods reaffirmed the following projections for fiscal 2016 at the Barclays Global Consumer Staples Conference:

  • 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
  • operating margin of more than 12% for the chicken segment
  • operating margin in the range of 1.5%–3.0% for the beef segment
  • operating margin of more than 10% for the pork segment
  • operating margin at the low end of 10%–12% for the prepared foods segment

The company has made the following projections for fiscal 2017:

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

According to Tyson Foods president Tom Hayes, “Tyson’s ‘Core 9’ product lines, which feature the Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells and State Fair brands, are growing and gaining momentum.” He added that “the investments we made in the Core 9 to spur volume growth are generating returns.” Next, we’ll discuss Sonoco Products (SON).

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