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Is Tyson Foods (TSN) Well Braced for High Pork Tariffs?
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The tariff war between the United States and China have caused worries for several agricultural and meat exporting companies, including Tyson Foods, Inc. (TSN - Free Report) . Recently, China hiked duties on several U.S. export items, including a 25% tariff on pork, in retaliation to the latter’s tariff stance. Incidentally, this caused the company’s shares to drop almost 6.2% on Apr 2.
Per sources, China is one of the largest markets for U.S. pork exports both in terms of value and volume. Analysts pointed that the raised tariff rate is expected to cause significant loss of market in China for several meat exporters, marring revenues for Tyson Foods and other prominent players in the meat industry such as Hormel Foods Corporation (HRL - Free Report) .
While China’s tariff rates have caused dark clouds to hover on the meat industry, Tyson Foods has many reasons to stay optimistic, courtesy of its rich portfolio of protein-packed brands, well yielding acquisitions and steadily surging demand for protein products in several markets. That said, let’s take a closer look at some of the factors aiding the company’s performance.
Rising Demand Bodes Well
Tyson Foods has been steadily gaining from enhanced sales across its Beef, Chicken and Prepared Foods owing to rising demand for protein-packed products. Management projects consistent rise in demand for such products and has plans to exploit opportunities in this space. For fiscal 2018, USDA expects overall domestic protein production to rise roughly 3% year over year. Such positive market scenario has driven Tyson Foods to make several investments, especially in expanding poultry production. Apart from this, the company has been steadily expanding fresh prepared foods offering, courtesy of consumers’ rising demand for natural fresh meat offerings without added hormones or antibiotics.
Acquisitions Aid Growth
Additionally, Tyson Foods has been focusing on acquisitions to expand its portfolio. In fact, the AdvancePierre buyout has been favoring the Prepared Foods segment. The acquisition led to a 2.4% and 9.5% rise in sales volume during the third and fourth quarters of fiscal 2017, while in first-quarter fiscal 2018 sales volume jumped 11.6%. Further, the company expects additional sales of approximately $1.1 billion from AdvancePierre during fiscal 2018.
Financial Fitness Program
Toward the latter half of 2017, Tyson Foods announced a Financial Fitness Program, directed toward enhancing operating efficiency, reduce overheads and fuel bottom-line growth. Incidentally, the company generated savings of nearly $37 million from this program in the first quarter. Further, the company aims to generate savings from this program, through synergies from AdvancePierre’s integration along with incremental cost optimization. These efforts are anticipated to generate total savings of roughly $200 million in fiscal 2018 and roughly $600 million by 2020.
Final Thoughts
Well, it is yet to be seen whether China’s raised tariff rates on pork will have negative impacts on Tyson Foods’ performance. Moreover, the company’s robust portfolio, strong geographic reach in approximately 117 countries along with its strategic buyouts and investments to meet the rising demand for protein-packed products are expected to counter the challenges stemming from the China market. In fact, such well-planned initiatives have aided this Zacks Rank #1 (Strong buy) company’s shares gain as much as 10.6% in a year, almost in-line with the industry’s rally of 10.7%. On that note, we are confident that Tyson Foods will be able to maintain its position as one of the prominent players in the food industry and counter challenges strategically.
United Natural Foods (UNFI - Free Report) , with a solid earnings surprise history and long-term earnings growth rate of 8.2% boasts a Zacks Rank #1.
Estee Lauder Companies (EL - Free Report) , with a long-term earnings growth rate of 13% sports a Zacks Rank #2 (Buy).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Is Tyson Foods (TSN) Well Braced for High Pork Tariffs?
The tariff war between the United States and China have caused worries for several agricultural and meat exporting companies, including Tyson Foods, Inc. (TSN - Free Report) . Recently, China hiked duties on several U.S. export items, including a 25% tariff on pork, in retaliation to the latter’s tariff stance. Incidentally, this caused the company’s shares to drop almost 6.2% on Apr 2.
Per sources, China is one of the largest markets for U.S. pork exports both in terms of value and volume. Analysts pointed that the raised tariff rate is expected to cause significant loss of market in China for several meat exporters, marring revenues for Tyson Foods and other prominent players in the meat industry such as Hormel Foods Corporation (HRL - Free Report) .
While China’s tariff rates have caused dark clouds to hover on the meat industry, Tyson Foods has many reasons to stay optimistic, courtesy of its rich portfolio of protein-packed brands, well yielding acquisitions and steadily surging demand for protein products in several markets. That said, let’s take a closer look at some of the factors aiding the company’s performance.
Rising Demand Bodes Well
Tyson Foods has been steadily gaining from enhanced sales across its Beef, Chicken and Prepared Foods owing to rising demand for protein-packed products. Management projects consistent rise in demand for such products and has plans to exploit opportunities in this space. For fiscal 2018, USDA expects overall domestic protein production to rise roughly 3% year over year. Such positive market scenario has driven Tyson Foods to make several investments, especially in expanding poultry production. Apart from this, the company has been steadily expanding fresh prepared foods offering, courtesy of consumers’ rising demand for natural fresh meat offerings without added hormones or antibiotics.
Acquisitions Aid Growth
Additionally, Tyson Foods has been focusing on acquisitions to expand its portfolio. In fact, the AdvancePierre buyout has been favoring the Prepared Foods segment. The acquisition led to a 2.4% and 9.5% rise in sales volume during the third and fourth quarters of fiscal 2017, while in first-quarter fiscal 2018 sales volume jumped 11.6%. Further, the company expects additional sales of approximately $1.1 billion from AdvancePierre during fiscal 2018.
Financial Fitness Program
Toward the latter half of 2017, Tyson Foods announced a Financial Fitness Program, directed toward enhancing operating efficiency, reduce overheads and fuel bottom-line growth. Incidentally, the company generated savings of nearly $37 million from this program in the first quarter. Further, the company aims to generate savings from this program, through synergies from AdvancePierre’s integration along with incremental cost optimization. These efforts are anticipated to generate total savings of roughly $200 million in fiscal 2018 and roughly $600 million by 2020.
Final Thoughts
Well, it is yet to be seen whether China’s raised tariff rates on pork will have negative impacts on Tyson Foods’ performance. Moreover, the company’s robust portfolio, strong geographic reach in approximately 117 countries along with its strategic buyouts and investments to meet the rising demand for protein-packed products are expected to counter the challenges stemming from the China market. In fact, such well-planned initiatives have aided this Zacks Rank #1 (Strong buy) company’s shares gain as much as 10.6% in a year, almost in-line with the industry’s rally of 10.7%. On that note, we are confident that Tyson Foods will be able to maintain its position as one of the prominent players in the food industry and counter challenges strategically.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Greedy for Consumer Staples Stocks? Check These
United Natural Foods (UNFI - Free Report) , with a solid earnings surprise history and long-term earnings growth rate of 8.2% boasts a Zacks Rank #1.
Estee Lauder Companies (EL - Free Report) , with a long-term earnings growth rate of 13% sports a Zacks Rank #2 (Buy).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>