Q4 Preview: Don't Be Chicken! Grab Tyson (TSN) Ahead of Numbers

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Tyson Foods Inc. ( TSN ) is trading in positive territory Friday at mid-day, heading into its fourth-quarter performance report.

Expected out before the market opens Monday, November 21, 2011, Tyson should report earnings of 31 cents per share revenue of $8.19 billion. Earnings would be over a 50 percent drop from 64 cents reported in the same period last year.

Tyson shares have stayed just about flat in the quarter, dropping about 0.5 percent to $17.36 at the end of September. Shares of Tyson are up nearly 13 percent since then, and are about 20 percent better on the year.

Last quarter, Tyson reported having a book value of $15.33 and cash of $2.61 per share. Without cash, Tyson is going for about 8.3 times next years earnings, compared with 8.7 times at Smithfield ( SFD ).

Earlier in September, CEO Donnie Smith affirmed that Tyson was on track for strong fiscal 2011 results. Smith cited improvements made in operations should more than offset sluggish demand, pricing issues, and higher input costs.

Shares are also up markedly since Barron's became bullish on Tyson in September.

Data from Bloomberg has 14 analysts with a Buy rating on Tyson, 4 at hold, and none with a Sell. The Street's price target average is $22, with a low of $18 and high of $27. Tyson stock has traded within a range of $15.41 to $20.12 over the last 52-week time frame.

Looking at some options, it appears at-the-money calls are mixed for December expiration. December 19 calls are up 4.8 percent, while 20 calls are down 14.3 percent. January ATM cals are both seeing some interest, though volume is low.

Analyst Comments

  • JPMorgan is modeling for earnings of 26 cents per share. In a recent note, JPMorgan said it sees an additional 40 percent of upside for Tyson, saying it missed the first leg of the recent rise on concerns that feed costs might rise higher.

    Recent data also shows that chicken prices are strengthening, with overall pricing near the 10-year average. JPMorgan is also bullish on beef, saying droughts in the Midwest have been trimming headcounts, while Tyson is becoming for efficient in the beef arena.

  • D.A. Davidson (DAD) is positive on Tyson shares. In a recent report, DAD said that production has fallen 5 to 7 percent since the spring, which bodes well for calendar 2012 margins. For chicken, DAD sees this as a weak point for the September quarter, but expects improving margins heading into 2012. Exports have also been improving, DAD notes, and feed cost risk may be more than mitigated heading into numbers.

  • KeyBanc is looking for EPS of 39 cents and $8.07 billion in sales. KeyBanc recently raised numbers following Pilgrims Pride ( PPC ) earnings in late October, which gave some insight into chicken pricing. As of early November, KeyBanc says recovery in chicken is only beginning, and is positive on the sector heading into 2012.

    For Tyson, KeyBanc commented it believes the Company "can deliver normalized chicken EBIT margins of at least 5% and have a positive earnings outlook for its beef and pork divisions."

  • Finally, Jefferies raised some targets on Tyson heading into results, also citing chicken margin improvements on the move. Click here for more color from Jefferies.
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Tyson's past performance at Streetinsider's Tyson's Income Statement .

Tyson will be holding a conference call Monday morning at 9:00am EST. Click here to go to the Webcast section of Tyson's Investor Relations page.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: PPC , SFD , TSN

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