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Food producer Tyson Foods (TSN), first discussed here on May 11, 2009, at a price of $12.35, finally appears to have found some traction, and I obviously still like the shares at this stage.
The shares of Tyson downtrended in bear-hug fashion for much of 2010, walking down to about $15 from $20. However, since then the shares found support at $15 and have since popped back up above $17, including a nice move above the key, 50-day moving average.
In 2011, Tyson's revenue should increase about 3% to 4%, as food demand rises in-sync with the U.S. and global economic expansions. Chicken and beef margins should widen. Modest pricing power also will occur.
Further, Tyson remains well-positioned to capitalize on the trend toward more protein in emerging market diets. Moreover, although the U.S. market accounts for the bulk of sales, Canada, China, Europe, Japan, Mexico, Russia, and South Korea hold the promise for impressive international revenue gains in the current decade. Emerging markets China, Mexico, and Russia are especially attractive: Middle classes in each country are expanding, and middle-income adults tend to spend more on food than lower-income groups.
One headwind: likely, rising prices for grain feed in 2011; however, any moderation in grain prices would boost TSN's bottom line.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for TSN are $1.83 to $1.80. That FY2012 EPS estimate looks about 5% low, according to my analysis.
2011 Outlook: I view Tyson as a long-term play, but if you're looking to sell TSN within the year, it's probably best to take your profits after it rises to $21 to $24, if it fails to rise above $25.
Stock Analysis: I consider Tyson Foods to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in TSN now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my TSN position before February 2011, and I'd put a sell/stop loss at $8.30.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
12-11-2010 @ 4:06PM
william lindblad said...
Supply and demand. Price of chicken will rise in 11.
Rising feed prices will cause a reduction in the amount of poultry being raised. The rise in feed prices are the result of lower world production, partially due to weather conditions, i.e. - the steppes. Isreal has one at present and tomatoes will likely suffer. Cost of breakfast is going up.
12-11-2010 @ 9:34PM
Hector said...
I know that many people earn hardly any money working for Tyson foods. Some of their plants are in areas where there is no other form of employment etc. I also know that Tyson frozen tv dinner chicken is disgusting like also some of the other brands. The drumsticks look like the chickens are not even aged enough for such to go in the slaughter houses. I also noticed a noticeable amount of oil or grease when those tv chicken dinners are put in the microwave or kitchen conventional ovens. The flesh of the chicken is loaded with breading and is like a wasted of money to purchase such dinners period. Maybe they should turn their chicken plants in something more productive than taking massive money for non serviceable chicken dinners.
12-11-2010 @ 9:15PM
Sheldon L said...
...also:
Low P/E, PEG, P/B and P/CF
Seems both metrics and market conditions are favorable.