Tyson Foods (TSN) Recalls Chicken Products On Allergen Risk

Per the media, Tyson Foods, Inc. (NYSE:TSN) is recalling nearly 2.5 million pounds of ready-to-eat breaded chicken owing to allergen risk. The possibility of breaded chicken containing milk, which acts as an allergen for many, was identified by a supplier on Jun 6.

Though Tyson Foods had already shipped meat to 30 states, the Springdale, AR-based company stated that the products did not reach stores. However, as per the U.S. Department of Agriculture, some schools have purchased these products through the company's commercial channels. Thankfully, no cases of illness have been reported till date.

Tyson Foods is the world's largest fully-integrated producer, processor and marketer of chicken and poultry-based food products. The company supplies value-added chicken products through food service, retail grocery stores, club stores and international distribution channels.

The company’s dominance in the chicken segment is commendable. However, declines in beef and prepared foods segments have been lowering the profit margins.

The company is planning to reduce costs across the Prepared Foods portfolio by restructuring its manufacturing network. Tyson Foods is also focusing on expanding its protein-packed brands as it seeks to divest non-protein businesses and focus on growth categories and growth channels. The company has recently acquired AdvancePierre, which will help Tyson Foods to expand its fresh prepared foods offering for both out-of-home and in-home eating occasions.

The company also announced plans to sell three non-protein businesses – Sara Lee Frozen Bakery, Kettle and Van’s – all part of its Prepared Foods segment. The move is in sync with its strategic focus on protein-packed brands.

However, the company is currently facing volume declines and increased costs in the Prepared Foods business. It has thus lowered its expectations for the year to 9% return on sales for the segment. The company expects the same to return to normalized range within fiscal 2018.

Tyson Foods’ Beef segment’s performance has been dismal of late. Higher domestic availability of fed cattle supplies and lower livestock costs led to the sluggishness in the segment. The company has also decided to reduce its beef production capacity due to lower cattle supply. In fiscal 2017, the company expects fed cattle supplies to increase 6–7% compared with the fiscal 2016 figure.

Tyson Foods’ stock declined 1.4% in the past six months,against the Food-Meat Products industry’s 5.4% gain. Notably, the industry is part of the top 43% of the Zacks Classified industries (114 out of the 265). The broader Consumer Staples sector is placed at bottom 31% of the Zacks Classified sectors (11 out of 16).

Tyson Foods currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in food stocks in the industry can consider SunOpta, Inc. (NASDAQ:STKL) , Aramark (NYSE:ARMK) and McCormick & Co., Inc. (NYSE:MKC) as valuable picks.

SunOpta has long-term earnings growth rate of 15.00% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aramark and McCormick, both carrying a Zacks Rank #2 (Buy), have growth rates of 12.00% and 8.83%, respectively.

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