Tyson Foods (NYSE:TSN) Inc. is a food production company. The company produces, distributes and markets chicken, beef, pork, prepared foods and related allied products. The company's operates in four segments: Chicken, Beef, Pork and Prepared Foods.
The company provides products and services to customers throughout the United States and approximately 130 countries. It has approximately 115,000 Team Members employed at more than 400 facilities and offices in the United States and around the world. Through its Core Values, Code of Conduct and Team Member Bill of Rights, Tyson Foods strives to operate with integrity and trust and is committed to creating value for its shareholders, customers and Team Members.
Performance Check: Impressive Figures Posted
For the quarter, Tyson reported revenue of $8.8 billion and represented a 4% gain compared to the $8.4 billion the company reported in the first quarter of 2013. According to the company's earnings release, all of its segments reported year-over-year outperformance, but the two that stood out most were beef and prepared foods.
- Warning! GuruFocus has detected 2 Warning Signs with TSN. Click here to check it out.
- TSN 15-Year Financial Data
- The intrinsic value of TSN
- Peter Lynch Chart of TSN
During the quarter, revenue in the company's beef segment rose an impressive 7.1% compared to the same quarter a year earlier. The primary driver behind this segment's growth was a 4.1% increase in volume accompanied by a 2.9% increase in price. Prepared foods performed even better. Although this segment is the company's smallest and represents less than 10% of revenue, it experienced a 7.9% rise in sales. This was driven by acquisitions, which added 3.5% to sales volume, but was also due to a 4.2% jump in sales price.
On top of rising revenue, the business benefited from lower-than-expected costs. For instance, its cost of goods sold fell from 93.6% of sales to 92.2%, mostly due to a doubling in the company's operating margin in its chicken segment.
What to Expect
In 2014 alone, the company is forecasting revenue of $36 billion, which would imply a growth rate of nearly 5%. If this does come to fruition, Tyson shares could very well be an attractive long-term opportunity for the valued investors.
The company also gave a positive outlook for the ongoing year. For fiscal 2014, Tyson expects earnings per share to be up 23% compared to the previous year. Domestic chicken production is expected to go up, although fed cattle and hog supplies are expected to remain short even in the upcoming year. However, the company expects the prepared foods segment to benefit from operational improvements and positive pricing.
For the long term, Tyson plans to grow the top line by 3% to 4% annually, backed by strong focus on its value added chicken products, prepared foods and beef and pork segments. It also plans to maintain an earnings growth of 10% a year and grow its international business by 12% to 16% by fiscal 2015.
Tyson also stopped using Zilmax, a drug which is used by meat processors to increase a cow's weight before it is slaughtered. This is mainly because many countries such as China and Russia banned imports of this meat, which resulted in a loss of sales for Tyson as well as other food companies such as Hormel Foods (NYSE:HRL). The meat processor decided to stop using Zilmax because of the effect on its exports.
$2 Billion-Plus Deal for Michael Foods
The company is exploring a bid for Michael Foods Group Inc., a deal that would combine one of the world's largest chicken processors with a large distributor of egg and dairy products, according to three people familiar with the matter.
A potential deal for Michael Foods, which is seen worth between $2 billion and $2.5 billion according to the people, would place Tyson, the nation's largest meat producer, into an adjacent category within poultry and protein.
Tyson Foods, which has a market cap of around $12 billion, has traditionally shunned large acquisitions. The last major acquisition it made was its 2001 purchase of IBP Inc. for $3.2 billion, which helped transform the company into the world's largest meat producer and processor.
A tie-up between Tyson and Michael Foods would bring synergies on the poultry side of the business as both companies raise chickens.
Tyson Foods looks increasingly attractive. With a growing chicken and processed foods segment, great cost control methods, and a bright outlook this company is ready for an upside. Investors should definitely take note of this food company.
The company has not only made significant efforts to attract more customers but has also overcome a number of problems, such as less pork supply, which is forcing pork prices to rise. Supply is affected mainly because of a virus, porcine epidemic diarrhea (PED), which led to the death of a large number of pigs.
Most people know there is a shortage of food throughout the world. This means there is a secular growth story in place for food manufacturers. Tyson Foods should see increased profits on soaring pork and beef prices. The company will be able to create greater shareholder returns for its valued investors.