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Tyson (TSN) Raises Profit and Acquisition Synergy Targets - Analyst Blog

Zacks Equity Research
Updated

Leading meat producer, Tyson Foods Inc. TSN provided an optimistic outlook for the upcoming years. It has raised its targets for synergies from the acquisition of The Hillshire Brands Co. under its prepared foods segments. The Arkansas-based meat processor now expects the buyout to yield more than $250 million in synergies for the current fiscal year compared with $225 million as expected previously.

Tyson expects to incur synergies of $400 million in fiscal 2016 and $600 million in fiscal 2017.

Tyson is transforming itself from a protein processor with one brand to a protein-centric consumer packaged goods company with a house of brands.

The processed food business has been performing above the normalized level for several quarters. Chicken nuggets, chicken sandwiches, wings, meatball sandwiches and bone-in chicken have been witnessing higher growth over the past few years, as an increasing number of health-conscious consumers are opting for chicken instead of red meat due to the associated health risks. Moreover, with consumption trend shifting away from high-priced beef, chicken demand is expected to go up, going ahead.

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Tyson also commented that its growth story is driven by its brands. The company owns leading brands in 13 core categories. Moreover, per IRI data, Tyson reported the second highest retail dollar sales growth for the last 52-week period.

Tyson made a solid start to fiscal 2015, as sales in the first half of the year jumped 16.8% to $20.8 billion. Earnings of $1.52 increased 15.2% year over year backed by improvement in sales and higher operating margins.

Tyson also expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 2% in fiscal 2015. Also, the company expects grain supplies to go up in fiscal 2015.

Tyson carries a Zacks Rank #2 (Buy).

Other stocks in the consumer staple sector worth considering include SUPERVALU Inc. SVU, Synder’s-Lance Inc. LNCE and Cal-Maine Foods Inc. CALM. All these stocks carry a Zacks Rank #2.


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