Analysts Expecting A Meaty Return From Tyson Foods

Tyson Foods, Inc. TSN reported its fiscal fourth quarter earnings this week. The food producer more than expected, partly due to lower costs.

The Analyst

Argus' John Staszak upgraded Tyson's stock rating from Hold to Buy with a $90 price target.

The Thesis

Tyson's fourth quarter earnings consisted of a "positive earnings surprise" as strength across the chicken, pork, beef and prepared foods business contributed to 49 percent year-over-year earnings growth, Staszak said in a Wednesday note. Tyson also reiterated its full year fiscal 2018 earnings per share guidance, which will likely prove to be conservative, as it doesn't include the impact of lower feed costs and benefits from acquisitions, such as AdvancePierre Foods Holdings, according to Argus. 

Growing demand for Tyson's core products will result in better-than-expected operating income over the coming years, the analyst said. The company is well-positioned versus its peers given its diversified product operating and ability to simultaneously increase dividend payout to investors and reduce its debt, Staszak said. 

Finally, Tyson's stock is "favorably valued" at around $76 per share, as it implies a valuation of 12.7x the analyst's fiscal 2018 EPS. This represents a discount compared to the average multiple of 19.3x among large-cap food processors and closer to the low end of Tyson's three-year historical multiple range of 11x to 19x, Staszak said. 

Price Action

Shares of Tyson were trading higher by more than 1 percent at $76.95 Wednesday morning, which marks a new 52-week high.

Related Links:

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