Tyson Foods (NYSE: TSN) is up 9% in early afternoon trading as I write this. The company's second-quarter earnings release is driving the buying. According to this article, Tyson reported an adjusted loss of $0.05 per share. The market was expecting a loss of $0.06 per share. So I guess the market was pretty happy about that.
Wall Street was probably encouraged by something else as well. If you take a look at the actual release, head on down to the statement of cash flows. Last year at this time, Tyson generated $144 million in cash from operations during the six-month period. This year, the company made $407 million from operations. Some nice changes in working capital helped out.
If you look through the previously cited news article, you'll note that one of the concerns now centers on the H1N1 flu. The scare is affecting sales of meat products, especially pork (obviously). It's been reported that fears of infection from pork products are not justified. However, the perception is there, and that may negatively impact Tyson's short-term future performance. Melly Alazraki also highlighted Tyson's challenges in this brave new world of anxiety over the virus. Other companies mentioned in her article include Smithfield Foods (NYSE: SFD) and Hormel (NYSE: HRL).
Tyson has had its problems during the recession. Recently, the company announced the closure of a processing plant. Today, however, it looks as if the market believes that the stock has everything priced in. As a matter of fact, it isn't just today's performance. The stock has been performing well lately.
But is Tyson a buy? I think it depends on your perspective of the current bull run in the markets. If you think that's not going to end, then Tyson probably is. My opinion? I would not buy Tyson because, personally, I think its stock has come too far. And I'm still looking for a big correction to this rally. So, call me chicken if you will. I will not buy Tyson at these levels.
Disclosure: I don't own any company mentioned; positions can change without notice.
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