Why Tyson Foods' Performance Will Continue Improving

Tyson Foods (TSN, Financial) had an outstanding fiscal 2014. The company ended the fiscal year on a strong note with a record improvement in adjusted EPS. Tyson is seeing good traction and is confident of a better performance in the future. It is working on improving structurally and reducing the volatility of its business. Following an outstanding 2014, Tyson is set for better times this year.

Expecting better times

Tyson is pleased with the chicken segment. It is seeing good growth in it. In the last quarter, it saw good improvement in the return on sales and volume. The company also managed to reduce the price as well which is expected to attract more customers to it. However, Tyson had been struggling with some disruptions in two of its plants which was also affecting its return on sales. The company is now relaxed to have eliminated those disruptions. It is now working on bringing back the production in line with its plans.

Further, to make chicken segment more attractive, it is up to adding more value to its portfolio in spring for its fully cooked and tray-packed chicken. With the growing demand in the tray-packed chicken, Tyson is confident that these initiatives will turn out to be a wise move by the company.

It is promoting the sale of no-antibiotic-ever-chicken under NatureRaised Farms brand which is seeing a double digit growth. With this strategy, Tyson is targeting the premium customers which are willing to pay higher for these branded chicken products.

What will drive growth

The growing demand in this segment is a clear indication of the success of this segment. The company anticipates the chicken demand to increase at least by 3% in 2015 as customers are rapidly shifting from high priced beef to chicken items. This expected growth in the demand for chicken will be a good support to Tyson’s pricing expectations.

In the future Tyson is expecting the demand for beef to remain high which will also support chicken and pork pricing. However, there is still enough volatility in the Tyson camp which is a hurdle to its margins. It is now focusing majorly on reducing its volatility to improve its margins. Moreover, Tyson is expecting the global supply for beef and pork to remain tight which is surely keep the price at elevated levels. Another bright spot for the company is that the consumer market is continually shifting towards increased protein consumption. As a result of this, Tyson sees incremental demand rising for its products in future giving enough opportunities to the company to improve its performance in future.

Moving on to Tyson’s international business, the company is now focusing on most profitable areas of business. Under this, Tyson is about to shut down the Latin American business which has been a weak performer for it. The company has plans to use the money generated by this shutdown to pay its outstanding debts. On the other hand, it is pleased to see good business opportunities in Mexico. The growing customer base is a good sign and Tyson seems well prepared to catch these opportunities. While in China, Tyson is holding on for a correct time when the demand will improve. Tyson is mainly focusing on China to secure long term benefits for the shareholders.

Conclusion

Tyson is pleased to have acquired Hillshire Farm which is contributing well to Tyson’s growth strategy. To support this, Tyson is now launching new extensions to expand Ball Park, Park’s finest franks. In addition, Tyson is extending its Hillshire Farm American Craft line of handcrafted, small batch smoked sausage with new products featuring authentic ingredients in bold flavors.