Tyson Foods Up 33% in 6 Months: What's Driving the Stock?

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Tyson Foods, Inc. TSN has been a preferred pick for investors lately. Shares of the company have surged 33.4% in the past six months, compared with the industry 's rally of 20%. Recently, this Zacks Rank #1 (Strong Buy) stock hit a new 52-week high of $78.03 during the trading session on Nov 17, eventually closing at $77.97.

We note that the company has been gaining from impressive performance in the previous quartets. Notably, Tyson Foods' earnings have outpaced the Zacks Consensus Estimates in two out of the trailing four quarters, with an average beat of 6.03%. Sales also beat estimates in three out of the past four quarters.

Let's look deeper into aspects which have been driving the company's impressive performance.

Solid Q4 Performance

Tyson Foods recently posted fourth-quarter fiscal 2017 results, wherein earnings and sales surpassed the Zacks Consensus Estimate and improved year on year. Results mainly benefitted from strong performance in all segments, with an increase of 3.2% in net volume. The performance of Beef and Chicken remained particularly sturdy owing to a rise in volume of 4.1% and 3.3%, respectively. The quarter also witnessed 7.2% growth in net average selling price.

Rising Preference for Protein-Packed Food Propels Growth

Of late, Tyson Foods has been divesting non-protein businesses and allocating resources toward more profitable segments which include chicken and beef products as well as other fresh food offerings. The performances of Chicken and Beef segments have been steadily improving owing to rising consumer demand for protein-packed food products. Such a trend is positively impacting volumes in the company's Pork segment. For fiscal 2018, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year. This will enable Tyson Foods to sustain its robust performance.

Acquisitions to Drive Prepared Food Segment

Rising consumer preference for protein-packed and fresh food offerings have also propelled the performance of Prepared Foods segment. Tyson Foods has undertaken several acquisitions to augment the segment's performance. In this respect, the acquisition of AdvancePierre has been driving the company's top-line in the last few quarters. Moreover, Tyson Foods announced plans to add Original Philly Holdings to this segment, which specializes in raw and fully-cooked Philly-style sandwich steak and cheesesteak appetizers. The takeover is expected to expand Tyson Foods offerings.

Positive Outlook

Considering the company's steady progress in all its food segments, management envisions earnings for fiscal 2018 to rise 7-10% from the prior year, to reach $5.70-$5.85 per share. Further, sales for fiscal 2018 are expected to increase 7%. The company has also initiated a Financial Fitness program to enhance cost savings and operating efficiency in the upcoming periods. The program is targeted to benefit the Prepared Foods and Chicken Segments performance in particular.

Undoubtedly, Tyson Foods is well positioned in the food market with a robust portfolio of strong brands and continuing efforts to sustain its sturdy performance.

Do Consumer Staple Stocks Interest You? Check These

Investors interested in the same sector may also consider stocks such as McCormick & Company, Inc MKC , MGP Ingredients, Inc. MGPI and US Foods Holding Corp. USFD . All these stocks carry a Zacks Rank #2 (Buy). You can see  the complete list of today's Zacks #1 Rank stocks here .

McCormick delivered an average positive earnings surprise of 4.1% in the trailing four quarters. It has a long-term earnings growth rate of 9.4%.

MGP Ingredients pulled off an average positive earnings surprise of 9.9% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

US Foods Holding came up with an average positive earnings surprise of 6.1% in the trailing four quarters. It has a long-term earnings growth rate of 15.1%.

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

This article appears in: Investing , Business , Stocks
Referenced Symbols: TSN , MKC , MGPI , USFD

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