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Tyson Foods Starts Off FY 2015 On The Right Foot

Feb. 06, 2015 11:36 AM ETTyson Foods, Inc. (TSN)
William Bias profile picture
William Bias


  • Tyson Foods benefited from low input costs and high product prices.
  • The company is paying down long-term debt to reduce interest expense.
  • TSN pays a small but sustainable dividend.

On Jan. 30, meat and poultry company Tyson Foods (NYSE:TSN) came out with its Q1 FY 2015 earnings announcement and 10-q. The company had a robust quarter due to some favorable conditions. Let's take a look to see what's going on with it.

Revenue and profitability expansion

In the most recent quarter, Tyson Foods saw its revenue, net income and free cash flow increase 24%, 22% and 163% respectively year-over-year. Tyson Foods essentially sells commodities, such as chicken, pork and beef products, built on other commodities, such as corn or grain based feed products. This means that it is a price driven business affected by the supply and demand balance of both components.

In the case of Tyson Foods, it benefited from the increased price of its products due to higher demand and/or lower supplies. Moreover, the glut of corn contributed to the decrease of feed costs (see chart below). Chicken and pork both experienced increases in demand while beef experienced supply constraints due to a "reduction in live cattle processed".

US Corn Farm Price Received Chart

US Corn Farm Price Received data by YCharts

Tyson Foods' acquisition of Hillshire Brands also contributed heavily to top and bottom line expansion, especially in the prepared foods segment. In the most recent quarter, Tyson Foods' prepared food segment saw year-over-year gains of 90% in volume. This segment also benefited from price increases.

Improving balance sheet

One of the things I like about Tyson Foods is that it is working on improving its balance sheet. The company reduced long-term debt by $650 million or 8% year-over-year. This brings the company's long-term debt down to 76% vs. 85% the same time last year which is an improvement, but still lies above my personal threshold of 50%. The reason for this action is simple-Tyson Foods assumed some of the debt of Hillshire Brands. Operating income still adequately covers interest expense by

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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