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Here's Why You Should Hold Tyson Foods In Your Portfolio Now

By Zacks Investment ResearchStock MarketsSep 20, 2017 01:25AM ET
www.investing.com/analysis/heres-why-you-should-hold-tyson-foods-in-your-portfolio-now-200214461
Here's Why You Should Hold Tyson Foods In Your Portfolio Now
By Zacks Investment Research   |  Sep 20, 2017 01:25AM ET
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The food industry has been struggling with rising competition, tight margins and an aggressive promotional environment. Larger food chains are strengthening their position by expanding their franchises and undertaking acquisitions. Moreover, Amazon.com Inc’s (NASDAQ:AMZN) recent takeover of Whole Foods Market (NASDAQ:WFM) has disconcerted major food and grocery retailers. Amazon’s growing strength through such strategic buyouts cut down revenue opportunities for other companies in the industry.

While grocery stocks have been under pressure, meat stocks are seen to be doing well, owing to rising consumer demand. One such stock is Tyson Foods, Inc (NYSE:TSN) that has been displaying strength due to the rising demand for its protein-packed products.

However, we observe that margin pressure and promotional environment has weighed down the company’s shares in the past six months. Shares of Tyson Foods have gained 5.8% compared with the industry’s advance of 8.1%.

Nevertheless, Tyson Foods has undertaken several initiatives to revive its performance. Let’s now delve into some of the aspects that have been impacting this Zacks Rank #3 (Hold) stock.

Strong Volume Growth in the Third Quarter

Tyson Foods’ third-quarter fiscal 2017 results benefitted from strong volume growth and solid performance of its Beef, Pork and Chicken segments. The company’s results were boosted by the rising demand of these products. Notably, the Beef segment was seen to be sluggish in the past. Nevertheless, robust domestic demand for beef products, improved availability of cattle supply and higher exports aided the segment’s growth during the third quarter. Further, for fiscal 2018, the USDA expects overall domestic protein production (chicken, beef, pork and turkey) to increase.

Strategic Acquisitions & Focus on Protein Packed Brands

Acquisitions have been one of the important growth drivers for Tyson Foods. The successful completion of AdvancePierre acquisition in June 2017, aided Prepared Foods segment sales volume to rise 2.4%, as witnessed in the company’s third-quarter results. Tyson Foods expects the transaction to generate net synergies of approximately $200 million within the next three years. Further, the acquisition will enable the company to expand its fastest-growing portfolio of protein-packed brands and fresh prepared foods offerings. Other notable acquisitions of the company that enabled portfolio diversifying include Hillshire, Circle Foods and Don Julio Foods.

Additionally, the acquisition of AdvancePierre and divestment of non-protein businesses (such as Sara Lee Frozen Bakery, Kettle and Van’s) are in-line with the company’s strategy to widen its protein-packed brands. Moreover, consumers are observed to shift away from red meat and opt for chicken, owing to health reasons. Taking advantage of this trend, Tyson Foods has been expanding its poultry plant capacities.

Innovation Aids Portfolio Growth

Tyson Foods continuously innovates and adds products to an already rich food line up. As an increasing number of health-conscious U.S. consumers are focusing on nutritious breakfasts, Tyson Foods considers it a high potential category. Recent launches like Jimmy Dean Frittatas, Stuffed Hash Browns, Tyson Food Service Fully Cooked Drumsticks and Buffalo Chicken Crispitos are getting good response from consumers.

Looking for More? Check These Consumer Staples Stocks

Investors may also consider better-ranked stocks such as Estee Lauder Companies, Inc (NYSE:EL) , flaunting a Zacks Rank #1 (Strong Buy) and Nu Skin Enterprises, Inc (NYSE:NUS) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Estee Lauder delivered an average positive earnings surprise of 13.7% in the trailing four quarters. It has a long-term earnings growth rate of 12.2%.

Nu Skin delivered an average positive earnings surprise of 10.8% in the trailing four quarters. It has a long-term earnings growth rate of 8.7%.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Nu Skin Enterprises, Inc. (NUS): Free Stock Analysis Report

Estee Lauder Companies, Inc. (The) (EL): Free Stock Analysis Report

Tyson Foods, Inc. (TSN): Free Stock Analysis Report

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Here's Why You Should Hold Tyson Foods In Your Portfolio Now
 

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Here's Why You Should Hold Tyson Foods In Your Portfolio Now

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