On January 26, Zacks Investment Research upgraded
) to a Zacks Rank #1 (Strong Buy) backed by its bright prospect
in beef and chicken business and consistent innovation towards
low fat meat production.
Why the Upgrade?
Strong momentum in the company's underlying business has
prompted analysts to raise earnings expectations.
Tyson's chicken segment has a strong momentum in the coming
quarters. As more and more people in U.S. are becoming calorie
conscious, there is an increasing trade down for high calorie red
meat. Demand for chicken has risen for several past quarters in
fiscal 2012 and has kicked off to a good start in 2013. Strong
demand fueled higher pricing and this is expected to result in
broader margin in the chicken segment in the coming quarter.
Moreover, company competitor Cargill has recently closed down
its beef processing plant in Texas, which is expected to wipe out
competition for Tyson in the area and also help the company to
expand its customer base in the region.
The company's endeavor to adapt to the changing demand of low
calorie protein foods is also encouraging. Tyson recently joined
forces with healthy and low calorie food specialist Hungry Girl
Lisa Lillien to provide new variants of low-calorie meals for
calorie-conscious customers. Since more and more people are
opting for low calorie foods, this is also expected to help the
company draw large number of foodies towards these healthy
protein rich meals.
The company has beaten estimates in the fourth quarter as well
as the fiscal year by 27.9% and 8.5%, respectively. Tyson's
financial position is also on a solid base. The debt-
to-capitalization ratio improved to 28.7% in fiscal 2012 from
32.8% in fiscal 2010.
Cash and cash equivalents at the end of fiscal 2012 was at
$2.0 billion, well above the targeted range of $1.2 to $1.5
billion. In the recently concluded quarter it hiked its quarterly
dividend by a modest 25%.
Tyson Foods also has an Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) of +8.5%. This, together with Tyson Zacks Rank #1, is a
meaningful and leading indicator of a likely positive earnings
surprise in the coming quarter.
Other Stocks to Consider
Other stocks that offer exposure attractive consumer staples
Smithfield Foods Inc.
) that carries a Zacks Rank #1 (Strong Buy). Two other stocks,
Sanderson Farms Inc.
) carry a Zacks Rank #2 (Buy).
HORMEL FOODS CP (HRL): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
SMITHFIELD FOOD (SFD): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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