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.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.