Like several food companies, Tyson Foods, Inc. TSN is gaining from at-home consumption trends amid the pandemic. This well-known meat products company has been witnessing strong growth in its retail business backed by the higher demand. Moreover, the company’s e-commerce channel has been performing well on consumers’ growing inclination toward digital transactions. Also, strong brand recognition and efforts to boost operational efficiency have been aiding the company.
Shares of Tyson Foods have gained 19.5% in the past three months compared with the industry’s rise of 5.6%. That said, let’s take a closer look at the factors serving as upsides for this Zacks Rank #3 (Hold) stock.
Strong Demand Aids Retail Channel
Tyson Foods’ retail core business lines witnessed share growth for the 10th consecutive time, during first-quarter fiscal 2021. Management highlighted that retail business growth during the first quarter was primarily backed by strong brand offerings. Moreover, increased at-home dining practices amid the pandemic served as an added upside for demand growth in this channel. In fact, strong retail sales were an upside for the prepared foods and chicken segments during the first quarter. Given the rising demand, the company has shifted part of its foodservice production to concentrate on retail. Continued at-home dining practices are likely to keep aiding growth in retail volumes.
Strong E-commerce Channel
Tyson Foods’ e-commerce wing has been performing well. Markedly, e-commerce sales surged 89% year on year during the first quarter of fiscal 2021. During the quarter, the company generated around $330 million worth revenues through its online channel. Management expects continued strength in the e-commerce channel as consumers continue adhering to online purchasing.
Strong Portfolio of Protein Products
Tyson Foods boasts a rich portfolio of protein packed brands that are growing rapidly across the globe. Though management expects food and protein demand to shift among different sales networks and witness short-term hiccups amid the pandemic, worldwide demand is expected to keep increasing. In the beef segment, the USDA projects domestic production to grow about 1-2% in fiscal 2021. For pork, domestic production growth is likely to be up 1%, per the USDA. To boost growth in the Prepared Foods segment, the company is focusing on effectively responding to consumers changing preferences. The company has also been engaging itself in facility expansions in order to boost production capacity.
Tyson Foods has also been steadily expanding fresh prepared foods offering, owing to consumers rising demand for natural fresh meat offerings without any added hormones or antibiotics. Moreover, Tyson Foods has been exploring growth opportunities in the alternative meat products space, which mainly includes plant-derived protein.
We note that Tyson Foods’ foodservice channel has continued to remain soft due to reduced outdoor dining trends amid the pandemic. In fact, such headwinds put pressure on the company’s Prepared Foods business during the first quarter. Apart from this, the company grapples with rising operating costs associated with the pandemic.
Nevertheless, the company is committed toward several operational and supply-chain efficiency programs to place itself better for the long run. These upsides, together with Tyson Foods’ robust brand presence, geographical reach as well as its efforts to cater to the evolving global demand keeps it well placed for growth in the forthcoming periods.
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Sanderson Farms, Inc. SAFM, flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 43.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The J. M. Smucker Company SJM has a long-term earnings growth rate of 1.6% and a Zacks Rank #2 (Buy).
United Natural Foods, Inc. UNFI, also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 13.6%, on average.
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