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Tyson Foods (TSN) Gains on Protein Demand & Capacity Expansion
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Tyson Foods, Inc. (TSN - Free Report) benefits from its focus on protein-packed brands and capacity-expansion efforts. The company continues to gain from robust demand in its retail core business lines. The ongoing recovery in the foodservice channel is also a driver. However, escalated input cost inflation is a headwind.
Let’s discuss this further.
Image Source: Zacks Investment Research
What’s Working for Tyson Foods?
Tyson Foods is focused on higher protein production to cater to the rising demand for protein-packed food. It boasts a rich portfolio of protein-packed brands, growing rapidly across the globe. Management has undertaken divesture of non-protein businesses to focus on the growing protein-packed food arena. TSN has been steadily expanding its fresh prepared foods offerings, owing to consumers’ rising demand for natural fresh meat offerings without any added hormones or antibiotics. Another area of focus for Tyson Foods has been its e-commerce business, as consumers are shifting to online shopping. It benefits from its brand strength, innovations, robust geographical reach and the ability to leverage manufacturing capabilities and cater to evolving global demand.
Tyson Foods is undertaking several operational and supply chain efficiency programs to place itself for the long run. The company is investing in capacity expansion and automation technology investments. In its last earnings call, management highlighted that it is on track with the construction of the new plants. The addition of new capacity will help the company address capacity constraints to better meet growing protein demand in all segments. Tyson Foods is ramping up utilization of its new plants in Humboldt, Eagle Mountain and Thailand. Further, management expects to commence operation for the fourth new plant in the fourth quarter of fiscal 2022. Apart from the new sites, the company upgrades capacity when required. In this regard, management has almost 10 projects planned for the fiscal third quarter, reflecting 25 million pounds of volume in Prepared Foods. The company projects capital expenditures to be nearly $2 billion for fiscal 2022.
Hurdles on Way
Tyson Foods has been battling escalated cost inflation for a while. In its last earnings call, management highlighted that every part of its business had borne inflation’s brunt. It saw increased costs across the supply chain for all inputs, including feed ingredients, live animals and other raw materials like cooking oils and basic supplies. The company is also grappling with an increased cost of labor and transportation owing to increased demand, fuel costs and limited availability.
During the second quarter of fiscal 2022, Tyson Foods’ SG&A expenses came in at $579 million, up $46 million from the year-ago quarter’s reported figure. The downside can be attributed to higher team member-related costs and investments in advertising and promotional spending to support its brands.
That being said, the Zacks Rank #3(Hold) company is constantly looking for ways to improve cost structure, alongside achieving operational improvements and customer service. Starting from fiscal 2022, management launched a new productivity program to drive a better, faster and more agile organization. The company anticipates achieving $1 billion in productivity savings by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. Management is on track to achieve its fiscal 2022 productivity savings.
TSN’s stock has inched up 1.2% year to date against the industry’s 0.9% decline.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1. PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year earnings per share (EPS) suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in the marketing and distributing of various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 11.5%, respectively, from the year-ago reported figure.
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Tyson Foods (TSN) Gains on Protein Demand & Capacity Expansion
Tyson Foods, Inc. (TSN - Free Report) benefits from its focus on protein-packed brands and capacity-expansion efforts. The company continues to gain from robust demand in its retail core business lines. The ongoing recovery in the foodservice channel is also a driver. However, escalated input cost inflation is a headwind.
Let’s discuss this further.
Image Source: Zacks Investment Research
What’s Working for Tyson Foods?
Tyson Foods is focused on higher protein production to cater to the rising demand for protein-packed food. It boasts a rich portfolio of protein-packed brands, growing rapidly across the globe. Management has undertaken divesture of non-protein businesses to focus on the growing protein-packed food arena. TSN has been steadily expanding its fresh prepared foods offerings, owing to consumers’ rising demand for natural fresh meat offerings without any added hormones or antibiotics. Another area of focus for Tyson Foods has been its e-commerce business, as consumers are shifting to online shopping. It benefits from its brand strength, innovations, robust geographical reach and the ability to leverage manufacturing capabilities and cater to evolving global demand.
Tyson Foods is undertaking several operational and supply chain efficiency programs to place itself for the long run. The company is investing in capacity expansion and automation technology investments. In its last earnings call, management highlighted that it is on track with the construction of the new plants. The addition of new capacity will help the company address capacity constraints to better meet growing protein demand in all segments. Tyson Foods is ramping up utilization of its new plants in Humboldt, Eagle Mountain and Thailand. Further, management expects to commence operation for the fourth new plant in the fourth quarter of fiscal 2022. Apart from the new sites, the company upgrades capacity when required. In this regard, management has almost 10 projects planned for the fiscal third quarter, reflecting 25 million pounds of volume in Prepared Foods. The company projects capital expenditures to be nearly $2 billion for fiscal 2022.
Hurdles on Way
Tyson Foods has been battling escalated cost inflation for a while. In its last earnings call, management highlighted that every part of its business had borne inflation’s brunt. It saw increased costs across the supply chain for all inputs, including feed ingredients, live animals and other raw materials like cooking oils and basic supplies. The company is also grappling with an increased cost of labor and transportation owing to increased demand, fuel costs and limited availability.
During the second quarter of fiscal 2022, Tyson Foods’ SG&A expenses came in at $579 million, up $46 million from the year-ago quarter’s reported figure. The downside can be attributed to higher team member-related costs and investments in advertising and promotional spending to support its brands.
That being said, the Zacks Rank #3(Hold) company is constantly looking for ways to improve cost structure, alongside achieving operational improvements and customer service. Starting from fiscal 2022, management launched a new productivity program to drive a better, faster and more agile organization. The company anticipates achieving $1 billion in productivity savings by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. Management is on track to achieve its fiscal 2022 productivity savings.
TSN’s stock has inched up 1.2% year to date against the industry’s 0.9% decline.
3 Solid Food Stocks
Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Sysco Corporation (SYY - Free Report) and Medifast (MED - Free Report) .
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1. PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year earnings per share (EPS) suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in the marketing and distributing of various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 11.5%, respectively, from the year-ago reported figure.