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Tyson Foods Stock Rose, Broader Markets Bleed

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  • Tyson Foods stock rose as broader markets bleed amid escalating US-China trade tensions.
  • The stock has grown more than four times the benchmark index.
  • The third-quarter EPS beat and strong outlook drove the stock higher.
  • Alternative protein products hit the markets.
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Tyson Foods stock

As the broader markets bleed amid the escalating US-China trade war, Tyson Foods (TSN) stock continued to rise. Amazingly, the stock has risen 57.0% YTD (year-to-date), which is more than four times the growth registered by the S&P 500. Part of the growth has been the company’s stellar sales outlook.

Noel White, Tyson Foods’ president, CEO, and director, said that the “company is likely to benefit from the outbreak of African swine fever.” The outbreak is impacting hog supplies in Asia. As a result, Tyson Foods will likely gain. Through the diversified portfolio and innovation, the company will likely benefit from the high demand and supply shortage. He added that Tyson Foods will likely see increased exports to China later this year.

Notably, China’s retaliation against President Trump’s latest 10% tariff on an additional $300 billion in Chinese imports led to the worst market rout on Monday. The S&P 500 fell about 3% or by 87.31 points, while the Dow Jones Industrial Average fell 2.9% or by 767.27 points. In contrast, Tyson Foods stock closed 5.1% higher on Monday. Better-than-expected third-quarter earnings and the stellar outlook drove the stock higher.

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Key takeaways from the third quarter

Tyson Foods announced its third-quarter results on Monday. The company reported net sales of 10.9 billion, up 8.3% YoY. The volumes increased 11.8% due to strong chicken, beef, and pork growth. However, the pricing fell 3.5%, which caused the company to miss analysts’ estimate of $11.1 billion.

The company posted an adjusted EPS of $1.47, which beat analysts’ estimate of $1.42. However, the earnings fell 2.0% YoY, which reflected lower pricing and an unfavorable mix.

Outlook

We expect Tyson Foods to continue to benefit from the high demand for protein. The company’s diversified portfolio will likely support sales growth. Although the company hasn’t seen any benefit from the African swine fever, it expects increased exports to China. Citing the USDA exports data, management stated that US pork shipments to China are rising. The company is optimistic about benefiting from the increased demand.

Tyson Foods is also expected to gain from rising demand for alternative protein. The company introduced two new products in the markets.  Last month, the company started shipping plant-based Raised & Rooted nuggets. Tyson Foods stated that the nuggets would be available in 4,000 retail stores by the end of September.

Management expects net sales to reach $43 billion in fiscal 2019. Due to higher exports and demand for protein alternatives, Tyson Foods’ revenues will likely reach $45 billion–$46 billion in fiscal 2020. The projected range reflects 6%–7% growth YoY, which is encouraging.

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