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Tyson stock 'challenged by beef headwinds,' says Stephens – what’s next?

EditorEmilio Ghigini
Published 10/03/2024, 06:14 PM
TSN
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On Thursday, Stephens initiated coverage on Tyson Foods (NYSE:TSN) stock with an Equal Weight rating and set a price target of $57.00. The firm highlighted Tyson's significant presence in the multi-protein industry and its reputation as a top-tier operator with a sound strategy for capital allocation aimed at enhancing shareholder value. Stephens holds a positive view of Tyson's Chicken segment, noting improvements made within that sector.

The analyst at Stephens acknowledged Tyson Foods' comprehensive scale and operational excellence. They pointed out the company's effective capital allocation strategy, which is designed to optimize shareholder returns. The firm also recognized the advancements within Tyson's Chicken business, which has been undergoing internal enhancements for several years.

Despite these positive aspects, Stephens expressed caution regarding Tyson's Beef division, a major contributor to the company's overall earnings. The firm indicated that challenges in the beef sector are likely to persist without expected relief from herd expansion for a few more years. This situation leads Stephens to adopt a wait-and-see approach, preferring a more favorable entry point or clearer signs of earnings growth before adopting a more bullish stance.

Stephens' neutral stance on Tyson Foods is influenced by the potential for further deterioration in beef earnings before any improvement is realized. The firm suggests that investors may benefit from waiting for a better opportunity to invest or until there is more certainty about the company's earnings trajectory.

In conclusion, while Tyson Foods is recognized for its strong position and improvements in the chicken market, the ongoing challenges in the beef segment are enough for Stephens to recommend a cautious approach. The firm's Equal Weight rating and $57 price target reflect this balanced perspective on the company's current prospects.

In other recent news, Tyson Foods, Inc. has seen varied assessments from different analyst firms. Piper Sandler moved Tyson Foods from a Neutral to an Underweight rating, citing concerns over increasing cattle costs and potential risks to beef and chicken pricing. This led to a reduction in the price target to $50.00 from the previous $57.00.

In contrast, Barclays maintained an Overweight rating and a $72.00 price target for Tyson Foods, highlighting the company's ongoing internal improvements and the anticipated resilience of its chicken, pork, and prepared foods segments.

Additionally, BMO Capital Markets increased its price target to $60, retaining a Market Perform rating, while Citi raised its target to $63, maintaining a Neutral rating. These revisions were largely due to Tyson Foods reporting strong third-quarter earnings per share (EPS) of $0.87, surpassing expectations of $0.67, and revenue of $13.35 billion, exceeding projections of $13.21 billion.

Tyson Foods also announced the appointment of Curt Calaway as its new Chief Financial Officer. Calaway, a veteran in the finance sector, has been with Tyson Foods since 2006 and previously served as the interim CFO. These recent developments reflect a cautious yet positive outlook on Tyson Foods' future earnings potential amid industry challenges.

InvestingPro Insights

Complementing Stephens' analysis, recent data from InvestingPro provides additional context to Tyson Foods' financial position. Despite the challenges in the beef segment highlighted by Stephens, Tyson Foods maintains a solid market presence with a market capitalization of $21.07 billion. The company's revenue for the last twelve months stands at $53.09 billion, reflecting its significant scale in the food products industry.

InvestingPro Tips reveal that Tyson Foods has raised its dividend for 11 consecutive years and has maintained dividend payments for an impressive 50 consecutive years. This consistent dividend history aligns with Stephens' observation of Tyson's sound capital allocation strategy aimed at enhancing shareholder value. Currently, the stock offers a dividend yield of 3.31%, which may be attractive to income-focused investors.

However, echoing Stephens' cautious stance, InvestingPro data shows that Tyson Foods suffers from weak gross profit margins, with a gross profit margin of 6.27% for the last twelve months. This metric underscores the challenges faced by the company, particularly in its beef segment as noted by Stephens.

On a positive note, analysts predict that Tyson Foods will be profitable this year, which could signal a potential turnaround from its recent performance. This projection, combined with the company's long-standing dividend history, may provide some reassurance to investors considering Stephens' Equal Weight rating.

For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights on Tyson Foods, with 8 more tips available on the platform.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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