Demand for chicken has been on the rise lately. People prefer chicken over red meat, since it is cheaper and does not contain as many calories as red meat. People have become health conscious and, therefore, have shifted to healthier food options. This change in food preference has benefited many of the chicken producers.
An apt example here is that of Tyson Foods (TSN, Financial), one of the largest meat producers in the U.S. Tyson's performance has been remarkable for quite some time, and its shares have jumped a healthy 32% in the last year. Its recently reported fourth-quarter results were also a blockbuster one, enabling its share price to move north.
The numbers
Total sales jumped 14% to $10.1 billion, as compared to the previous year. This was higher than the analysts' estimate of $9.9 billion. The top line was driven by growth in most of the business segments. Factors such as higher demand, higher prices of meat and one recently made acquisition helped the revenue grow. Revenue for the fiscal year also surged 19.3% to $37.6 billion, over the prior year.
The adjusted earnings of the company stood at $0.87 per share as against the earnings of 0.70 per share in last year's quarter. The analysts were expecting it to be at $0.77 per share. The bottom line was driven by higher sales, which made up for higher input costs.
By the segments
Revenue from the chicken segment declined 1.8% to $2.78 billion over last year. This decline was because of a 4% drop in prices due to lower feed costs. However, higher demand for chicken resulted in higher volumes in this segment.
The beef segment surged 13.5% to $4.4 billion during the quarter. Revenue in this segment was driven by a price increase of 21.5%, which was offset by a decrease in volumes as people lowered their purchase of beef.
The pork segment too jumped 16% to $1.6 billion as demand for domestic pork increased. Also, the price per unit increased 16.5% due to an increase in input costs.
The prepared foods segment was one of the bright spots. Revenue from this segment was up 43%, clocking in at $1.3 billion. This increase was not only because of higher demand for its products, but also due to the acquisition of Hillshire Brands. Further, International sales were up 12% to $361 million due to growth in regions such as China and Brazil.
Future
Demand for chicken is estimated to increase in the future by 3% to 4%. Further, production is expected to rise by 2% to 3%. Thus, the company should benefit from this gain.
Moreover, Tyson Foods acquired Hillshire Brands in August, which added to the revenue. Also, this buyout is expected to reduce costs by $255 million annually. This is in addition to the acquisition of Sara Lee some time back.
Key takeaway
It is clear that Tyson Foods is expanding and strengthening its business through acquisitions and expansion. It is witnessing gains in all the segments. Also, it has increased its dividend to $0.10 per share. These factors, coupled with a bright outlook, make this meat producer an attractive pick.
