Tyson's Shares Rise 3.4% - Analyst Blog

Shares of the meat processor Tyson Foods Inc. ( TSN ) surged 3.4% on Aug 6, 2013, following better-than-expected third-quarter fiscal 2013 earnings announced the day before.

The closing price of Springdale, AR-based Tyson's stock was $30.71 on Aug 6, representing a stellar return of 107.9% on a 1-year basis and 53.7% on a year-to-date basis.

Strong Third-Quarter Fiscal 2013 Results

Tyson's third quarter adjusted earnings of 69 cents per share beat the Zacks Consensus Estimate and the prior-year quarter earnings by 17.0% and 35%, respectively. Earnings were on the upswing due to strong momentum in the Chicken and Beef segments and lower share count following share buybacks in the quarter.

Sales in the Chicken segment grew as consumers are becoming increasingly health conscious and are moving away from high calorie red meat toward the lower calorie chicken options. Moreover, the chicken items are less pricey than their red meat counterparts.

The Beef segment turned around during the quarter benefiting from a stable live cattle market and increased operational efficiencies in the beef producing plants.

Moreover, a sharp decline in corn prices following a record harvest in 2013 boosted margins in the quarter as corn serves as the main feed for chicken.

Potential for Expansion in China

Tyson sees bright prospects for chicken in the international markets. The outbreak of avian influenza in China has prompted people to buy local chicken products. This has opened up new opportunities for Tyson to increase export to China.

Moreover, as per media reports, the World Trade Organization passed a ruling on Aug 2, 2013, stating that the tariffs imposed by China on certain imported American chicken products went against international fair trade practices. This also sent shares soaring as U.S. meat producers like Tyson can now increase their export to China in the coming quarters.

Bright Prospects Upcoming Quarter

Further, Tyson has bright prospects in the upcoming quarter with its constant focus on innovation which is expected to further improve profitability. Keeping in view the rising demand for nutritional food products, Tyson has worked toward preparing its food items in compliance with the new dietary guidelines regarding the calorie and sodium limits.

Other Stocks to Consider

Currently, Tyson carries a Zacks Rank #2 (Buy). Other diversified consumer staples stocks worth considering include Dole Food Company Inc. ( DOLE ), Pilgrim's Pride Corp. ( PPC ) and Lorillard Inc. ( LO ). While Dole Food and Pilgrim's Pride carry a Zacks Rank #1 (Strong Buy), Lorillard holds a Zacks Rank #2 (Buy).

DOLE FOOD CO (DOLE): Free Stock Analysis Report

LORILLARD CO (LO): Free Stock Analysis Report

PILGRIMS PRIDE (PPC): Free Stock Analysis Report

TYSON FOODS A (TSN): Free Stock Analysis Report

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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.

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

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