Shares of food company Tyson Foods Inc. TSN reached a 52-week high of $51.84 on Dec 3 following the announcement of its fourth quarter fiscal 2015 results on Nov 23. In fact, the company’s shares have been gaining momentum since it announced plans to discontinue operations at two plants on Nov 19. Shares of Tyson Foods eventually closed at $51.48 on Dec 4.
Factors at Play
On Nov 23, Tyson posted fiscal fourth quarter 2015 results. Despite missing estimates, Tyson's adjusted operating income (excluding the impact of the additional week) increased 21.1% to $568 million in the fourth quarter driven by higher sales and lower feed costs. Adjusted operating margin increased 100 basis points (bps) to 5.8%. For fiscal 2015, adjusted operating income rose 37%. This marked the third consecutive year of growth.
The company also made vigorous progress in the prepared foods segment. Strong demand for chicken products and the Hillshire Brands acquisition boosted sales of prepared foods in the fourth quarter. In fact, Tyson is raising its Hillshire Brands synergy estimates for fiscal 2016 to more than $500 million, and above $700 million for fiscal 2017. The additional synergies will allow more investment in innovation, product launches and the strengthening of its brands.
Tyson Foods’ decision to discontinue operations at two plants also reinforces the company’s efforts to improve overall performance of its prepared foods business. The pepperoni plant in Jefferson, WI and the facility in Chicago, IL are expected to be shuttered during the second half of the company’s fiscal 2016, ending Oct 1, 2016.
Tyson Foods has a Zacks Rank #2 (Buy). Its peer Hormel Foods Corp HRL also holds the same Zacks rank. Other well-positioned consumer staple companies include B&G Foods, Inc. BGS and Omega Protein Corp. OME, both sporting a Zacks Rank #1 (Strong Buy).
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