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Tyson Foods' (TSN) Sale of Pizza Crust Unit to Drive Growth

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Apart from making prudent investments and buyouts, Tyson Foods, Inc. (TSN - Free Report) also undertakes strategic divestitures to increase focus on expanding in the protein-rich space. This is evident from the company’s recent deal to offload its pizza crust business to an affiliate of Peak Rock Capital, which is a private equity firm. The agreement, which includes the sale of TNT Crust, is expected to close in September with the deal terms remaining under covers.

Founded in 1981, Tyson Foods’ TNT Crust venture manufactures self-rising crusts and partially baked crusts. These products are catered to foodservice customers as well as frozen pizza makers. TNT Crust’s sale will include the sale of its two manufacturing facilities in Green Bay, WI. Workers of these facilities will continue serving the company under the new holder.

Will Focus on Protein-Rich Space Uplift Stock?

The idea behind this planned divestiture is to focus more on the company’s key growth area — protein-packed offerings. Well, Tyson Foods has long been committed toward this strategy, given the escalating consumer demand for protein products. In this regard, the company recently concluded the sale of its Sara Lee Frozen Bakery and Van’s businesses to Kohlberg & Company.

On the contrary, Tyson Foods also focuses on making investments and undertaking acquisitions to augment protein-packed offerings. The company’s investments in Memphis Meats and Beyond Meat are important examples in this connection. In fact, Tyson Foods’ investment in Beyond Meat indicates the company’s efforts to venture into the meat-substitutes market. Apart from this, the company has been steadily expanding fresh prepared foods offering owing to consumers’ rising demand for natural fresh meat without any added hormones or antibiotics.

The company also invested $84 million (in August 2017) and $300 million (in November 2017) to expand poultry production capacity in Tennessee. Such efforts combined with the acquisition of AdvancePierre and Original Philly indicate the company’s dedicated focus on augmenting protein-packed food products.

However, this Zacks Rank #5 (Strong Sell) company recently narrowed earnings projection for fiscal 2018, following its third-quarter fiscal 2018 results.  The company now expects adjusted earnings for the fiscal in the range of $5.70-6.00 per share compared with the previous view of $6.55-6.70. Management resorted to such a move on account of negative impacts of increased tariffs and volatility in market conditions that are likely to hurt profits.



These factors along with escalated freight and labor expenses seem to have hurt investors’ sentiments. Evidently, shares of Tyson Foods have lost 10.6% in the past three months compared with the industry’s decline of 5.6%. Nonetheless, we believe that Tyson Foods’ strategic moves in the protein-rich space position it well for the long term. Notably, the company expects demand for protein to rise consistently and is well placed to exploit all opportunities in the space. For fiscal 2019, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to rise roughly 2-3% year over year.

Unsure About Tyson Foods? Check These Solid Food Stocks

Medifast (MED - Free Report) , with a Zacks Rank #1 (Strong Buy), delivered positive earnings surprise in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 22%, carries a Zacks Rank #2 (Buy).

Pinnacle Foods has long-term earnings per share growth rate of 8% and a Zacks Rank #2.

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