Advertisement
Markets

Tyson Foods: Chicken Little

The world's largest poultry producer has watched sales -- and earnings -- fall, but analysts say the company's prospects are improving.

It would be easy to assume the sky is falling at Tyson Foods, one of the world's largest chicken producers. The Springdale, Ark., company lost $127 million, or 37 cents a share, for the quarter that ended April 1 as sales dipped 1.7% to $6.25 billion. Avian influenza has sapped the demand for poultry. And bird flu will grab more headlines as the U.S. government announces its plans to deal with the virus if it becomes pandemic.

Advertisement - Article continues below

Chicken isn't the only protein problem for Tyson. Its beef business reported a $188 million operating loss in the quarter. That division has languished since 2003 when a case of mad cow disease was found in the United States. Chief executive John Tyson blamed a worldwide meat glut for the company's anemic quarterly performance.

But Credit Suisse analyst David Nelson says that the chicken market has bottomed out, which should bode well for Tyson's shares (symbol TSN). "The magnitude of the weakness is behind us," Nelson says.

Tyson Foods usually increases chicken production for the summer but won't this season. In fact, the company has cut its supply of chickens by 25%. Tyson executives say cases of bird flu have waned and forecast that poultry demand in Western Europe will improve. Moreover, they expect the reopening of Taiwan to beef imports to buoy that division.

Advertisement
Advertisement - Article continues below

Indeed, the earnings picture is improving. A few weeks ago, analysts, on average, expected Tyson to lose 11 cents a share for the fiscal year that ends September 30. Now, they expect a profit of one cent a share.

That's not much, but it indicates that analysts' perceptions of Tyson's prospects are improving, and that bodes well for the stock, which closed Tuesday at a little under $15 and is about 31% off its mid-2004 high. Nelson expects Tyson to earn $1.20 per share in the fiscal year that ends September 2007, so the stock trades at a modest 13 times that number. Nelson rates the stock "outperform," with a price target of $18.

-- Thomas M. Anderson

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census
Politics

17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census

Every 10 years, the 435 seats in the House of Representatives are reassigned based on the results of the U.S.
July 2, 2020

Recommended

Closing Bell 7/6/20: U.S. Stocks Grab the Baton From China
Markets

Closing Bell 7/6/20: U.S. Stocks Grab the Baton From China

A surge in Chinese equities, as well as a massive improvement in services-sector data, lifted U.S. stocks and sent the Nasdaq to new highs Monday.
July 6, 2020
When Online Investing Turns Deadly: Lessons from a Robinhood Trader’s Suicide
investing

When Online Investing Turns Deadly: Lessons from a Robinhood Trader’s Suicide

Gamification of financial apps can make investing fun, but unsophisticated investors can get in over their heads if they aren’t careful.
July 6, 2020
21 Dividend Increases During the COVID Crisis
dividend stocks

21 Dividend Increases During the COVID Crisis

These 21 stocks were doling out dividend increases as the coronavirus crisis accelerated – and as many stocks were cutting or outright suspending thei…
July 3, 2020
The Awkward Relationship Between Markets and the Economy
investing

The Awkward Relationship Between Markets and the Economy

Why is the stock market doing so well during such a rough time? Well, it’s because the stock market and the economy are not the same thing.
July 3, 2020