Credit Suisse: Three Pieces Of New Information Favor Tyson Foods

Robert Moskow of Credit Suisse upgraded shares of Tyson Foods TSN on Wednesday to Neutral from Underperform with a price target raised to $42 from a previous $38. The analyst notes three distinctive events which justify the upgrade. First, the highly respected consulting firm EMI recently stated that it expects a one percent increase in chicken production in 2015 versus the USDA's forecast for a three percent rise. The combination of a tight supply and strong chicken demand has kept chicken prices above their normal seasonal patterns. Second, according to the analyst's research, beef margins have jumped “into the high end of the normalized range.” Tyson Foods will also enjoy strong margins and similar benefits for the rest of the calendar year. Finally, sow prices continue to decline which bodes well for Hillshire Brands' profit margins in its first quarter under Tyson Foods. Hillshire Brands has “strong momentum” heading into the final quarter of the year due to its “extraordinary” range of product innovation and strong consumer demand. Bottom line, according to Moskow, “Tyson Foods has an excellent management team and a portfolio that is uniquely positioned to capitalize on the evolving consumer trend toward higher protein and lower carbohydrate diets. In our view, this brings the risk/reward in the stock back into balance.”