Back to top

Image: Bigstock

Tyson Foods' (TSN) Solid Brands & Expansions Key To Growth

Read MoreHide Full Article

Focus on capacity-expansion endeavors is working favorably for Tyson Foods, Inc. (TSN - Free Report) . The well-known leader in protein is well placed to capitalize on the rising demand for protein-packed brands. That said, Tyson Foods is not immune to inflationary pressure.

Let’s delve deeper.

Zacks Investment Research
Image Source: Zacks Investment Research

Expansion Efforts Solid

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. Adding new capacity will help the company address capacity constraints to meet the growing protein demand in all segments. Tyson Foods is ramping up utilization of its new plants in Humboldt, Eagle Mountain and Thailand. 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.

What Else is Working Well 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. The company’s diverse protein portfolio, omnichannel capabilities, solid brands and value-added products contributed to the upside in the second quarter of fiscal 2022. Tyson Foods’ retail core business lines, including well-known brands like Tyson, Jimmy Dean, Hillshire Farm and Ball Park, delivered solid share performance.

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 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.

The company is constantly looking for ways to improve cost structure, alongside achieving operational improvements and customer service. 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.

Is All Rosy for Tyson Foods?

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 increased labor and transportation costs 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 was caused by higher team member-related costs and investments in advertising and promotional spending to support its brands.

Focus on the aforementioned growth drivers will likely help the Zacks Rank #3 (Hold) company keep its growth story alive. TSN’s stock has increased 13.8% in the past year against the industry’s 7.4% decline.

Looking for Better-Ranked Food Bets? Check These

Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Sysco Corporation (SYY - Free Report) and United Natural Foods (UNFI - 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 (Strong Buy). 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 stocks here.

The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year earnings per share (EPS) suggests growth of 63.2% from the year-ago reported number.

Sysco, which engages in marketing and distributing 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.

United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for UNFI’s current financial year sales and EPS suggests growth of 7.2% and 4.9%, respectively, from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.