Shares of Tyson Foods, Inc. TSN reached a new 52-week high of $45.07 on Jun 24, after management announced that it has undertaken a five-pronged approach to increase the profitability and efficiency of its pizza business. Further, the meat processor’s share price has been on the rise ever since it raised its targets for synergies from the acquired The Hillshire Brands Co.
Growth Drivers
The leading meat processor is focused on boosting its top line and is taking every possible measure to maintain its position in the industry. Amid growing demand for Italian cuisines, Tyson undertook five strategic initiatives to increase the efficiency and profitability of its pizza brand — BOCINI. These initiatives focus on the growing pizza category, as 19% consumers want more pizza on the menu, per Technomic’s 2014 The Pizza Trend Report.
Tyson Food Service – a subsidiary of Tyson Foods – has suggested measures to increase the versatility of the traditional pizza to match the taste of modern consumers and reduce cost and combat fluctuating commodity prices in the pizza brand of the company. Tyson Food Service provides expertise, insights and production capabilities into ways of improving the brand equities of the company.
Additionally, the Springdale, AR-based company announced in May that it expects The Hillshire Brands (bought in 2014) to yield more than $250 million in synergies for the current fiscal year compared with $225 million as expected previously. This announcement attracted investors’ attention.
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 line 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 the consumption trend shifting from high-priced beef, the demand for chicken is expected to go up.
Tyson currently carries a Zacks Rank #3 (Hold). Some better-ranked companies in the consumer staples sector are Pilgrim's Pride Corporation PPC, The WhiteWave Foods Company WWAV and True Drinks Holdings, Inc. TRUU. All these stocks carry a Zacks Rank #2 (Buy).
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