In its recently held investor call, Tyson Foods Inc. (TSN) reaffirmed its long term outlook. The company Tyson plans 3% to 4% top-line growth annually, backed by strong focus on its value-added chicken products, prepared foods and beef and pork segments.
The company also plans to maintain an earnings growth rate of 10% a year and attain 12–16% growth in international business by fiscal 2015. The company also aims to achieve 6–8% growth in the value-added poultry business and prepared foods business in the long term.
However, Tyson also expects demand for protein to go up in the near future. However, it fears that supply will not be able to match the geared up demand due to constrained domestic availability of protein in the short term.
In the investor call, Tyson announced that it expects per capita availability of protein to decline, especially in the United States. The company also predicted supply constraints mostly in the chicken segment because of high corn prices (used as chicken feed). Moreover, drought conditions in the Southwest and the West Coast of the United States have lowered beef production due to unavailability of pastures.
Tyson also expects to reduce hog slaughter and pork production levels by 4–5% this summer due to the Porcine Epidemic Diarrhea Virus.
Tyson aims to combat the supply constraints and meet the higher demand through innovation. The company has also announced plans to ramp up its processed chicken capacity.
The leading meat processor provided an optimistic outlook for the upcoming years with solid earnings growth backed by decent top-line gains.
Tyson delivered decent results in second-quarter fiscal 2014 reported on May 5. Despite missing the Zacks Consensus Estimate by a penny, earnings beat year-ago results by 58% backed by strong sales in most of the segments. Net sales increased 7.7% year over year and beat the Zacks Consensus Estimate by 2.6% on the back of strong sales in most of the segments.
Guidance for Fiscal 2014
For fiscal 2014, Tyson expects overall domestic protein production (chicken, beef, pork and turkey) to decrease approximately 1% from fiscal 2013. However, the company expects grain supplies to go up in fiscal 2014. However, the company expects the prepared foods segment to benefit from operational improvements and positive pricing.
Tyson expects fiscal 2014 sales to be around $37 billion backed by strong demand for its products. The company expects capital expenditure within $650 to $700 million.
Tyson carries a Zacks Rank #3 (Hold). Another stock in the food, meat processing sector includes Sanderson Farms Inc. (SAFM) and Pilgrim’s Pride Corporation (PPC) both carrying a Zacks Rank #1 (Strong Buy). Another stock in the retail sector worth considering is Coty Inc. (COTY) alsocarrying Zacks Rank #1.
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