Tyson Foods Ends Fiscal Year on High Note

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Nov 17, 2014

The chicken and beef producer, Tyson Foods (TSN, Financial), reported a promising set of numbers on Nov. 17 for the fourth quarter. Despite a decline in beef product sales, the food honcho remains a leader in prepared food which drove revenue to a peak, topping Wall Street estimates on both the top and bottom lines.Ă‚

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The quarter’s impressive figures

Tyson, the largest U.S. meat processor, reported revenue increased 13.6% year-over-year to $10.1 billion. This revenue number topped the $9.88 billion analyst estimate. Net income for the quarter, however, dropped by a whopping 50% to nearly $137 million, resulting in earnings of $0.35 per share. Excluding the cost of the acquisition of Hillshire Brands (HSH, Financial), Tyson recorded earnings of $0.87 per share during the quarter, up from $0.70 per share reported in the same quarter last year.

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Though the drop in net income seems large, it still beat the Wall Street estimate of $0.77 per share.

Currently, revenue for the full fiscal year stands at $37.6 billion, and net income stands at $864 million. This is a 9% increase in revenue and a 30% jump in net income over the previous year's numbers. Full year earnings came at $2.94 a share, which beat the company’s forecast $2.78 in earnings per share.

Acquisition plays vital role in meeting numbers

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Tyson President and CEO, Donnie Smith, said, “This is an exciting time as we integrate Hillshire Brands and Tyson Foods, and I believe that when we look back on this merger years from now, we’ll see it as a watershed event…”

The merger will help the company to achieve $225 million in savings from synergies plus an additional 7-9% return on chicken sales, according to the predictions of the company management. Acquiring Hillshire is already proving to be accretive for the company, as prepared food grew 38% to $1.3 billion in the quarter. Tyson estimates that the Hillshire acquisition will add $4 billion to its prepared food revenue in the next fiscal year.

Tyson projects full-year earnings for the 2015 fiscal year to be in the range of $3.30-3.40 per share. It also expects that the total domestic production will increase 1% from the current levels by the next fiscal year.

In the long run, Tyson expects the operating margin to remain between 7-9% in the chicken segment. The company expects demand for chicken to increase 3-4%. As a result, the chicken segment will possibly witness strong operating income growth in the upcoming fiscal year.

Dividend payment remains the trump card

Tyson Foods currently has a dividend payment of just 0.74% and has not reduced its dividend payments since it began paying regular dividends to investors from 1997. The company has a 17-year record of dividend payments without a reduction, which is remarkable from an investment perspective.

Conclusion

Tyson seems to be on a growth trajectory and the recent merger has added to the momentum. Investors are happy with the results as they beat the Street expectations from all sides.