Tyson Foods (NYSE: TSN) really improved its fortunes in Q3. Last year at this time, Tyson earned 3 cents per share. This year, the food company, famous for its chicken brand, made 35 cents per share. Sales actually dipped a little under 3%, but management is diligently fighting the good fight when it comes to efficiencies. Both costs of sales and selling, general and administrative expenses went down.
According to Bloomberg, the adjusted income of 33 cents per share simply blazed past Wall Street's expectations. The call was for 22 cents per share. You've got to like that. Higher prices for poultry helped the quarter.
Cash flow, according to the company press release, also shined brightly. For the nine-month period, Tyson generated $684 million from operating activities. In the previous year's similar time frame, only $35 million was produced. Changes in working capital helped to fuel this big gain.
Tyson closed down 2.7% on Monday upon the Q3 news. The market obviously wanted to sell the numbers, but should it have?
The company's stock hasn't done much since the second-quarter results. It's too bad, because I liked the Q3 data. I believe they show that management is succeeding in making the most out of the company's sales. Which is no easy task in this environment. And I get the impression, after reading between the lines, that Tyson, while still cautious, is looking for a better consumer environment in the future when it comes to the products it sells at supermarkets.
From a fundamental point of view, I see Tyson as a reasonable buy. From a technical perspective, I'm nervous about the stock's chances. So which investment philosophy should I give more weight to?
In this case, I think I'll err on the side of caution. I'll go with the stock's price action and say that Tyson is not a buy at this time. Put it on a watch list anyway. If it experiences a big slide, then it might offer value that cannot be ignored.
Disclosure: I don't own any company mentioned; positions can change without notice.
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