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KeyBanc Capital Markets Rated Tyson Foods as ‘Overweight’

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Price movement

Tyson Foods (TSN) has a market cap of $20.6 billion. It rose 1.6% to close at $57.05 per share on December 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.0%, -18.6%, and 8.1%, respectively, on the same day.

TSN is trading 10.9% below its 20-day moving average, 17.0% below its 50-day moving average, and 16.1% below its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid Core ETF (JKG) invests 1.3% of its holdings in Tyson Foods. The YTD price movement of JKG was 10.2% on December 2.

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

  • Hormel Foods (HRL) — $17.9 billion
  • Pilgrim’s Pride (PPC) — $4.5 billion
  • Sanderson Farms (SAFM) — $1.9 billion

Tyson Foods’s rating

On December 2, 2016, KeyBanc Capital Markets initiated its coverage of Tyson Foods with an “overweight” rating. It set the stock’s price target at $70.00 per share.

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Performance of Tyson Foods in fiscal 4Q16

Tyson Foods (TSN) reported fiscal 4Q16 sales of $9.2 billion, a 12.8% fall compared to its sales of $10.5 billion in fiscal 4Q15. Sales in its Chicken, Beef, Prepared Foods, and Pork segments fell 7.0%, 21.2%, 8.5%, and 5.8%, respectively, in fiscal 4Q16 compared to fiscal 4Q15.

Tyson’s gross profit margin and operating margin expanded 250 basis points and 120 basis points, respectively, in fiscal 4Q16 compared to fiscal 4Q15. Its net income and EPS (earnings per share) rose to $391.0 million and $1.03, respectively, in fiscal 4Q16, compared to $258.0 million and $0.63, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.96 in fiscal 4Q16, a rise of 15.7% compared to fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, Tyson Foods (TSN) reported sales of $36.9 billion, a fall of 10.9% YoY (year-over-year). The company’s gross profit margin and operating margin expanded 320 basis points and 250 basis points, respectively, in fiscal 2016.

TSN’s net income and EPS rose to $1.8 billion and $4.53, respectively, in fiscal 2016, compared to $1.2 billion and $2.95, respectively, in fiscal 2015. It reported adjusted EPS of $4.39 in fiscal 2016, a rise of 39.4% YoY.

TSN’s cash and cash equivalents and inventories fell 49.3% and 5.1%, respectively, in fiscal 2016. Its current ratio rose to 1.8x, and its debt-to-equity ratio fell to 1.3x in fiscal 2016, compared to its current and debt-to-equity ratios of 1.5x and 1.4x, respectively, in fiscal 2015.

Projections

Tyson Foods (TSN) made the following projections for fiscal 2017:

  • flat sales growth
  • EPS of $4.70–$4.85
  • capital expenditure of ~$1.0 billion

Next, we’ll look at B&G Foods (BGS).

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