Tyson Foods, Inc. (TSN) is one of the biggest processors and sellers of meat and countless prepared food products sold in more than 90 countries. John W. Tyson founded the company in 1935 by hauling chickens to market in Kansas City and St. Louis.
Tyson’s total sales last year were $33.0 billion, with the sale of beef products representing 41% of total revenues, followed by chicken at 35%, pork at 14%, and sales in prepared foods at 10%.
Tyson’s most recent quarter (fourth fiscal quarter of 2013), turned out to be a record in terms of sales and earnings per share. The company beat its own expectations for fiscal 2013, handily beating its previous outlook for international sales; operating margins, especially for chicken and beef, also grew substantially. This contributed to a marked improvement in bottom-line earnings and adjusted earnings per share attributable to the company.
Management reported increased demand as well as higher prices in the most recent quarter. Input costs for fiscal 2014 are expected to drop due to higher grain supplies. The company continues to buy back shares, and it recently increased its quarterly dividend by a substantial 50%.
The numbers were exactly what Wall Street wanted to hear. The stock is up approximately 50% since the beginning of the year and has actually broken out of a long consolidation, which is a bullish signal. The company’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
The company’s fiscal fourth-quarter revenues grew seven percent to a record $8.9 billion, while earnings per share grew 37% to $0.70.
The company’s share price had been in the doldrums for years, and its huge quarterly dividend increase represents a renewed sense of confidence from management.
I think this stock has more upside near-term; $35.00 per share wouldn’t be an unreasonable 12-month price target. The stock isn’t expensively priced, and company management says it plans to beat its expected 10% gain in earnings next year.
Investors may not have a lot of enthusiasm for a company like this, and there are certainly higher dividend paying stocks available in the marketplace. However, Tyson is a good benchmark stock on consumer spending and consumption in the U.S. market, with one in every five pounds of chicken, beef, and pork in the U.S. being produced by Tyson.
All in all, it was a record quarter for the company and expectations going into 2014 are solid. With a 50% quarterly dividend increase, Tyson’s financial performance is a good indicator of consumer spending and consumption, making it the type of stock investors should watch going into the New Year.