Analysts are forecasting 13.6% growth for this meat producer this year. The shares have a current dividend yield of 2.87%, paid quarterly.
Tyson Foods, Inc. (TSN)
From Cabot Undervalued Stocks Advisor
Which industries might recover more quickly than others? Buy shares in the products you buy at Kroger (KR) and Walmart (WMT). People are still buying food and household products: meat, cereal, candy, cotton balls, shampoo, OTC medicines, birthday cards, beer and cigarettes. Look for famous names within the Consumer Defensive sector.
I like Tyson Foods (TSN), a very financially sound, growing companies that provide the world with poultry and other meats. You’re having a hard time finding chicken in the supermarket, right? Let me assure you that there’s no supply problem. The chicken is getting shipped to supermarkets, and people are hoarding it. Imagine the number of people who used to routinely buy fast food, or eat in restaurants. You already know that chicken was the meat that they most likely chose from menus. Now those same people are buying chicken and cooking it at home.
Suppliers are shifting their shipments from restaurants to supermarkets, and consumers are buying chicken as swiftly as it arrives in the freezer section of grocery stores. Tyson is slated for strong profit growth in both 2020 and 2021. As a bonus, its share price has already begun recovering, with lots of room for additional capital gains.
Tyson Foods is the largest U.S. food company, with operations in 20 countries, and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair. Management is focused on the growing global need for protein, and fulfilling that need in a sustainable and environmentally conscious manner. Tyson Foods was featured in the December 10 and January issues of Cabot Undervalued Stocks Advisor.
Back in November, China agreed to buy more poultry from the U.S., lifting their nearly five-year ban on poultry imports, and they also removed existing tariffs. Then in January 2020, China promised to buy significantly increased amounts of U.S. poultry in 2020 and 2021 as part of a Phase 1 U.S.-Sino trade deal, which helps alleviate China’s need for protein sources in the wake of the devastation that African Swine Fever imparted on the country’s hog population. Last week, China additionally agreed not to ban all U.S. poultry imports if avian flu is discovered among any U.S. poultry populations. Instead, China will temporarily ban poultry products from any U.S. state where an avian flu outbreak occurs.
In March 19th comments about U.S. grocery stores running low on meat in recent weeks, Tyson CEO Noel White said that this temporary supply and demand imbalance should be resolved within a week, indicating that there is no supply problem, but rather that consumers’ hoarding activity has led to increased demand, compounded by a demand shift from restaurants to supermarkets.
Earnings growth projections for 2020 have come down about 9% since late January as analysts assumed that China would be purchasing fewer protein products from the U.S. than they’d recently indicated in association with the Phase 1 trade agreement. Analysts are now forecasting EPS to increase 13.6% and 15.8% in 2020 and 2021 (September year-end). The 2020 P/E is 9.9.
Last week, JPMorgan raised its rating on TSN from Neutral to Overweight. The stock formed a double-bottom pattern on the price chart in recent days, and has decidedly turned upward. I’m moving TSN from Hold to a Strong Buy recommendation. The stock will still bounce around, but I believe the worst is over. Strong Buy.
Crista Huff, Cabot Undervalued Stocks Advisor, www.cabotwealth.com, 978-745-5532, March 25, 2020