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Tyson Foods: How We Are Playing The Protein Giant

May 08, 2018 10:40 AM ETTyson Foods, Inc. (TSN)6 Comments


  • Tyson Foods stock has pulled back heavily from its highs of $84 a few months ago and following the Q2 earnings we are intrigued.
  • The company's segment performance is highlighted to inform trends in the top and bottom line performance.
  • The Street is underappreciating adjusted operating income growth as well as the company's cost savings initiatives.

This morning, BAD BEAT Investing highlighted Tyson Foods (NYSE:NYSE:TSN) as a buy at $65.25. In this column we wish to describe to our followers what we are seeing in this leading world supplier of meats/proteins to industry and retail supermarkets. We have been back and forth on the name over the years, generally calling for buys when the stock was at a discount, and then becoming more cautious when such discounts dissipated. Currently we have seen a selloff and we believe this is an attractive level to get long shares once again.

Recent price action

Shares have pulled back significantly in recent months, and are at $65.25 at the time of this writing:

Source: BAD BEAT Investing

While Tyson has been a great trading vehicle, it is our thesis that the stock is a strong long-term buy and hold. However, as you can see, the stock has been steadily pulling back in recent months, and as such, we believe another buying opportunity may be upon us here after the recent earnings.

In the present column, we will discuss performance relative to our expectations for the name, and highlight key strengths and weakness you need to be aware of. Further, we offer our updated 2018 projections.

Top line considerations

When it comes to the top line, we see that revenues have been growing at Tyson. Take a look at Q2 sales the last few years:

Source: SEC filings, chart created by BAD BEAT Investing

Momentum coupled with performance relative to the Street's expectations drive action in a stock. For many quarters, Tyson has exceeded our projections, but we will be the first to say that the company came up short this quarter, a least on the headline numbers.

We were looking for revenues of $9.85 billion, and at $9.77 billion, Tyson missed our expectations by $80

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Analyst’s Disclosure: I am/we are long TSN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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