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Tyson Fresh Meats Announces Its Plans for Expansion

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Price movement

Tyson Foods (TSN) has a market cap of $27.5 billion. It fell 1.6% to close at $74.83 per share on September 29, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.5%, -0.80%, and 41.2%, respectively, on the same day. TSN is trading 0.10% below its 20-day moving average, 0.70% above its 50-day moving average, and 15.0% 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 according to multifactor selection. The YTD price movement of JKG was 8.6% on September 29.

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) — $20.1 billion
  • Pilgrim’s Pride (PPC) — $5.3 billion
  • Sanderson Farms (SAFM) — $2.2 billion

Latest news on Tyson Foods

In a press release on September 29, 2016, Tyson Foods reported that it “is investing $27 million to expand the production capacity of its case-ready beef and pork plant in Council Bluffs, Iowa.”

It added that “the project will include a 55,000 sq. foot addition for new production lines and warehouse space and increase the plant’s capacity to produce fresh ground beef, beef and pork cuts, and meal kits that are ready for distribution to retail grocers. The expansion is underway and scheduled to be completed in July 2017. It is expected to add 350 jobs, bringing total employment at the plant to more than 1,400.”

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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 $10.1 billion reported in fiscal 3Q15. Sales of the chicken, beef, and prepared foods segments fell 0.51%, 12.1%, and 0.06%, respectively. Sales of the pork segment rose 5.3% between fiscal 3Q15 and fiscal 3Q16. The company’s gross profit margin and operating income rose 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 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 71.4% and its inventories rose 1.4% between fiscal 4Q15 and fiscal 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 dividend 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 expenditure of ~$725 million
  • net interest expense of ~$245 million
  • adjusted EPS of $4.40–$4.50
  • operating margin of more than 12% for the chicken segment
  • operating margin 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

Next, we’ll take a look at Hormel Foods (HRL).

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