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Few Reasons Why This Meat Company Will Strengthen Your Portfolio

May 13, 2014 | About:
Suravi Thacker

Suravi Thacker

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Factors such as rising prices of chicken, beef and pork had been hampering sales of meat producing companies since people were either restricting their consumption or shifting to cheaper options. However, meat companies have some other ways of attracting customers and boosting their sales.

An apt example is that of Tyson Foods (TSN), a meat producing company, which managed to post great first quarter numbers as both the top line and the bottom line grew significantly.

Great Performance

Revenue grew a whopping 7.8% over last year, clocking in at $9.03 billion. Also, it beat the Street’s expectations of $8.38 billion. Revenue was driven by growth across all the five segments of the company. The meat retailer managed to put up a good show despite problems such as severe winter conditions and tight supply of beef and pork.

Higher demand for chicken was one of the key factors for the top line growth. Chicken sales surged to $2.8 billion from $2.7 billion last year, helped by higher volumes. Also, beef sales jumped 11.8% to $3.8 billion despite price increases. Beef prices were increased mainly because of rising input costs, which were eating into the margins.

Also, Tyson Foods spent a lot on promoting its products, which lured customers. Still, the company managed to expand its margins as well as register an earnings growth of 39.5% to $0.60 per share. However, analysts were expecting earnings of $0.63 per share.

One of the key strengths of Tyson Foods is its Prepared Food segment. This segment has been growing remarkably, especially because of the company’s efforts to expand it. It recently made three acquisitions in order to enhance its product portfolio in this category. The most recent buyout was that of Bosco’s Pizza in January. This acquisition helped in diversifying its product portfolio to include breadsticks and frozen pizzas.

Point of Concern

Although the meat producer is doing well, demand in China is a matter of concern. Demand in this region has softened which led to a decline in International sales. Revenue from International business dropped to $328 million from $331 million, a year ago.

Bright Future Waits

Nonetheless, Tyson provides a number of reasons to believe in its future. For instance, it has ramped up its marketing efforts so that it can attract more customers. Also, it has been expanding its footprint internationally, especially in Brazil and China.

Additionally, it has introduced new products in the breakfast category in order to benefit from the rising demand for products such as yogurts, sandwiches and smoothies. This new line of breakfast items is called Tyson Day Starts and offers frozen breakfast products which are convenient for customers to have.

Moreover, the company has raised its guidance for the year since it expects to benefit from these strategies as well as from the three acquisitions made recently. These acquisitions should help boost sales in the prepared food segment and promotions should help draw customer attention in all the food categories.

Final Thoughts

Tyson Foods look increasingly lucrative with so many positives working in its favor. However, lower demand in China has been an obstacle in its path to growth. Nonetheless, its host of strategies such as bringing in new products, expansion into new regions, making acquisitions and higher promotions, which should help in driving revenue north. Therefore, this meat producer looks increasingly attractive.


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