Will Tyson Foods Stock Bounce Back?

Tyson Foods, Inc. (NYSE:TSN) is one of the biggest food companies in the world. It is a recognized leader in protein and operates through four segments: Beef, Pork, Chicken, and Prepared Foods. The company has many well-known brands, such as Tyson®, Jimmy Dean®, and Hillshire Farm®. These brands help the company be a market leader and attract customers.

Tyson’s share price is up 8% for the year, vastly underperforming the major market, so will it recover from a recent slump and is now the right time to buy?

How Is Tyson Planning To Grow?

Tyson’s ongoing focus on innovations greatly affects how the company grows. This focus on making new products, like the recent Honey Chicken Bites and Restaurant Style Crispy Wings, shows management’s commitment to keeping up with changing consumer tastes. These new options match more sophisticated tastes and make it easier for people at mealtime, thereby helping Tyson win over more customers and grow market share.

The success of Tyson’s Jimmy Dean Griddle Cakes line shows how the company is very good at making new products. Popular tastes like maple and blueberry have made the product popular among customers who repeatedly buy it. Arguably, it stands out as one of the best-prepared food innovations in recent years. Such successes show Tyson’s skill in making products that connect strongly with buyers and that’s an intangible asset helping the company to scale.

So too Tyson’s efforts to improve operations, like improving live activities and making plants work more efficiently, are crucial for success. The company’s attention to operations details have resulted in higher-quality customer service and stronger relationships with partners. At the same time, it also helps to keep inventory levels lower.

These improvements have increased financial performance and let Tyson put more money back into its main businesses, like the value-added Chicken segment, which in turn has helped the company speed up growth plans such as the Danville fully cooked facility.

Leveraging its well-known brands, Tyson has plans to grow further in the protein market. With Tyson, Jimmy Dean, and Hillshire Farm being among the top 10 protein names, there is a not insignificant opportunity to get into more homes.

Tyson Trading at Low PE Vs Future Growth

By mid-year, Tyson Foods had seen sales increase by 1.6%, reaching $13.35 billion. The company’s gross profit also grew by 29.7% to $878 million compared to the previous year’s. 

Tyson had the best adjusted operating income in seven quarters during the third quarter. The non-GAAP operating income increased 174.3% from last year to $491 million. Also, the adjusted net income attributable to Tyson and adjusted earnings per share increased significantly. They grew by 483% and 480%, reaching $309 million and $0.87 each.

Cash and equivalents totaled $2.57 billion, a big increase compared to $573 million on September 30, 2023. The company’s total current assets reached $10.57 billion by this date, higher than the $8.72 billion from September 30, 2023.

Fast forward one quarter and almost identical top line sales of $13.5 billion were reported but net income grew from $196 million to $364 million.

What Are Analysts Forecasting for TSN?

Tyson is increasing its adjusted operating income forecast for the fiscal year 2024 mainly because it is seeing better results in the Chicken segment. The company now believes total AOI will be between $1.6 billion and $1.8 billion.

In the Chicken segment, Tyson is seeing very good results, triggering management to raise the AOI guidance range to between $850 million and $950 million. This shows insiders are confident about how well this sector is doing.

For Prepared Foods, Tyson is keeping its AOI forecast steady between $850 million and $950 million, as the segment is doing as expected. Yet, the top brass are lowering their AOI prediction for the beef section to show an estimated loss of around $400 million to $300 million. This change recognizes the continuing difficulties in the cattle market cycle.

In the pork segment, Tyson is increasing its AOI forecast to $100 million to $200 million. This change comes because the results so far this year have been better than the company expected.

Also, Tyson is being very careful with investing spending and has changed its capital expenditure range for the year to between $1.2 billion and $1.3 billion, largely in order to meet profit goals and manage cash flows better.

Will Tyson Stock Bounce Back?

Analysts are forecasting Tyson stock will bounce back to $65.57 per share, the consensus price target. The stock is trading now at a low PE multiple of just 26.9x relative to net income growth forecasts of 29.1% annually over the next 5 years. If those forecasts are true, Tyson may be a screaming buy right now.

For the most part, research analysts are on the same page, forecasting Tyson’s revenue can grow marginally compared to last year. This increase might make the company’s revenue reach $53.14 billion. Plus, EPS is predicted to increase by 111.5% compared to the previous year, reaching $2.83.

Looking to the next fiscal year ending September 2025, they expect Tyson’s revenue to go up 1.4% from last year, making it $53.89 billion but what stands out most is EPS that is predicted to rise by 33.1%, becoming $3.77.

Tyson’s valuation is enticing when measured against other multiples too. The forward EV/Sales ratio for Tyson is 0.58x, which is 67.4% less than the industry average, which stands at 1.77x. Similarly, its forward Price/Sales ratio is 0.42x, 68.3% lower than the industry average of 1.32x.

Tyson’s forward non-GAAP P/E ratio is 22.06x, 24.3% more than the sector average of 17.75x. Also, the company’s forward EV/EBIT ratio stands at 19.12x, surpassing the industry average of 14.77x by 29.5%.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.