Tyson Foods (TSN, Financial) is one of the world's largest producers of chicken, beef, pork and prepared foods. Its leading brands are Tyson, Jimmy Dean, Hillshire Farm, Sara Lee frozen bakery, Ball Park, Wright, Aidells, and State Fair. The company operates an integrated poultry production process which consists of breeding stock, contract growers, feed production, processing, further-processing, marketing and transportation of chicken and related allied products, including animal and pet food ingredients. Tyson operates in five segments: Chicken, Beef, Pork, Prepared Foods, and International. The company provides products and services to customers throughout the United States and approximately 130 countries.
Performance Check: Impressive Figures Posted
On Nov. 17, 2014, this Springdale, Ark.-based company reported net sales of $10.1 billion for the fourth quarter, an increase of 14% year-over-year. Tyson’s adjusted operating income increased 13% to $469 million over the fourth quarter of the prior year. Its adjusted EPS were up by 24% to $0.87 compared to EPS from continuing operations of $0.70 in the fourth quarter of fiscal 2013. The company’s overall adjusted operating margin for the quarter was 4.8%.
In fiscal 2014, Tyson’s adjusted EPS from continuing operations increased 30% to $2.94 compared to $2.26 of the prior year. Net sales were $37.6 billion, an increase of 9% over prior year, and the overall adjusted operating margin was 4.4%. A chart has been provided below to show Tyson’s segment wise performance for the fourth quarter.
As of Sept. 27, 2014, Tyson’s cash and cash equivalents were $438 million compared to $1.15 billion a year ago. Further, long-term debt stood at $7.54 billion at the end of the fourth quarter compared with $1.8 billion a year ago.
Positive Outlook
Tyson expects adjusted earnings in the range of $3.30-3.40 per share for fiscal 2015. It also expects its overall domestic protein production (chicken, beef, pork and turkey) will increase approximately 1% for fiscal 2015. Estimates from the USDA expects that chicken production will increase 2-3%, which will generate 7-9% return on sales; however, Tyson expects its return more than 10%. Further, a chart has been provided below to show Tyson’s FY 2015 outlook.
To strengthen its position, Tyson has completed its merger with Hillshire Brands Co. (HSH, Financial), a leader in branded, convenient foods on Aug. 28, 2014. Hillshire Brands' portfolio includes iconic brands such as Jimmy Dean, Ball Park, Hillshire Farm, State Fair, Sara Lee frozen bakery and Chef Pierre pies, as well as artisanal brands Aidells, Gallo Salame, Van's Natural Foods and Golden Island premium jerky. This merger will help Tyson to leverage its iconic brands and also to strengthen its position in the prepared foods segment. This merger has also helped Tyson to accelerate its sales in the prepared foods segment in the fourth quarter. It is expected that the merger of these two companies will generate synergy savings of $225 million in fiscal 2015 and more than $500 million by fiscal 2017.
Why Tyson?
Tyson has got a strong market leadership, and produces approximately one out of every five pounds of chicken, beef, and pork in the United States. A chart has been provided below to show Tyson’s market position compared to its peers.
Tyson’s worldwide presence is also quite strong. It has 46 chicken plants, 13 beef plants, 9 pork plants, 41 prepared food plants, 11 international plants, 6 turkey facilities, and 2 R&D centers. The company’s growth strategies are to accelerate, innovate, and cultivate. After Nestle, Tyson is positioned second in the frozen, poultry, and breakfast foods. Tyson’s frozen category sales data for 52 weeks ending November 2, 2014 is $3.6 billion. Further, a chart has been provided below to show Tyson’s priorities for cash.
On a Concluding Note
Overall, Tyson is a solid company because it has an increasing financial trend, and EPS is increasing. The company is focused on expanding margins, reducing earnings volatility, leveraging iconic brands and market share, and moving quickly on integration and synergies. Tyson has solid operations in China and India, and is improving its business strategies to earn more revenues from these countries in the future. Further, world population is growing 75 million per year, which helps in increasing protein consumption. This will help Tyson to strengthen its position in the industry.
Source: Company website
I feel bullish that this global meat producer will continue its trend and won’t let its valued investors down in the long run.
