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Tyson Foods (TSN) Gains on Retail Demand & Sturdy E-commerce

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Rise in at-home dining and cooking trends amid the pandemic, has turned out to be a significant upside for several food companies, including Tyson Foods, Inc. (TSN - Free Report) . This well-known meat, chicken and prepared foods company is gaining from strength in its retail business owing to sturdy demand conditions. Tyson Foods’ e-commerce channel has also been performing well amid consumers’ rising inclination toward digital transactions. Apart from these, the company is benefiting from brand strength and efforts to boost operational efficiency. Let’s delve deeper

Strength in Retail Channel & E-commerce

Tyson Foods is gaining on rising demand in its retail channel, thanks to increased at-home consumption. In first-quarter fiscal 2021, the company’s retail core business lines witnessed share growth for the 10th consecutive time. Management highlighted that its retail business growth is primarily backed by strong brand offerings. In fact, strong retail sales were an upside for the company’s prepared foods and chicken segments during the first quarter. Given the rising demand, the company shifted part of its foodservice production to concentrate on retail. Continued at-home dining practices are likely to keep aiding growth in retail volumes.

Tyson Foods’ e-commerce wing has also been performing well. Markedly, e-commerce sales surged 89% year on year during the first quarter of fiscal 2021. During the quarter, the company generated as much as $330 million worth revenues through its online channel. Management expects continued strength in the e-commerce channel as consumers continue adhering to online purchasing.

Rising Demand for Protein Products

Tyson Foods boasts a rich portfolio of protein packed brands that are growing rapidly across the globe. In the beef segment, the USDA projects domestic production to grow about 1-2% in fiscal 2021. For pork, domestic production growth is likely to be up 1%, per the USDA. In the Prepared Foods segment, the company expects to continue focusing on responding to the changing consumer behavior. Also, the company expects better results from its operations in the International/Other segment. Though management expects food and protein demand to shift among different sales networks and witness short-term hiccups amid the pandemic, worldwide demand is expected to keep increasing.

Apart from this, the company has been steadily expanding fresh prepared foods offering, owing to consumers rising demand for natural fresh meat offerings without any added hormones or antibiotics. Moreover, Tyson Foods has been exploring growth opportunities in the alternative meat products space, which mainly includes plant derived protein.

 

Wrapping Up

Though the company is seeing increased retail demand, foodservice demand continues to be affected by below normal operations as outdoor dining trends remain soft. In fact, such headwinds put pressure on the company’s Prepared Foods business during the first quarter.  Apart from this, the company grapples with rising operating costs associated with the pandemic.

Nevertheless, this Zacks Rank #3 (Hold) company has been committed to several operational and supply-chain efficiency programs to place itself better for the long run. These upsides, together with Tyson Foods’ robust brand presence, geographical reach as well as its efforts to cater to the evolving global demand keeps it well placed for growth in the forthcoming periods.

Shares of the company have rallied 16.5% in the past three months against the industry’s rise of 9.7%.

Looking for Food Stocks? Check These

Sanderson Farms, Inc. (SAFM - Free Report) , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 46.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pilgrims Pride Corporation (PPC - Free Report) , has a long-term earnings growth rate of 24.1% and a Zacks Rank #2 (Buy).

The Hain Celestial Group, Inc. (HAIN - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average.

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