How Tyson Foods Can Feed Hungry Investors Ahead of Earnings

Tyson is expected to post year-over-year declines in both quarterly profit and revenue.
By Richard Saintvilus ,

Tyson Foods (TSN) - Get Report , the U.S. meat processor, will report fiscal fourth-quarter earnings before the opening bell Monday. Due to concerns about bird flu that have negatively impacted Tyson's chicken business at various times in 2015, revenue has missed Wall Street's estimates in two straight quarters. But Tyson, which has raised its beef prices to offset slumping chicken sales, has found ways to maintain profitability.

For the quarter that ended in September, analysts on average expect earnings to be 88 cents a share on revenue of $10.35 billion, translating to year-over-year declines of 1% and 2.4%, respectively. For the full year, earnings are projected to decline 8.8% year-over-year to $3.20 a share, while revenue of $41.08 billion would yield an increase of 9%.

It's a testament to the company's management that earnings are projected to be in positive territory, given the problems Tyson has had to deal with.

TSN stock, which is up some 10.5% in 2015, besting not only the S&P 500 (SPX) index, but also the SPDR S&P Retail ETF (XRT) - Get Report (down about 9% in 2015), has been rewarded for managing through such a tough period. And it would seem, based on rising earnings per share (EPS) estimates for the just-ended quarter, Wall Street expects Tyson to feed profit-hungry investors for the next several quarters, too.

Just in the past 30 days, the Springdale, Ark.-based food company has seen its projected EPS estimate for the quarter that ended in September climb from 87 cents a share to 88 cents. Estimates for its first fiscal quarter, ending in December, as well as the full fiscal year, ending in Sept. 2016, both climb by a penny.

Combined with the company's business outlook, calling for a 3% increase in fiscal 2016 protein production, Tyson sees no signs of slowing down. TSN stock -- despite its outperformance -- has a consensus buy rating and an average analyst 12-month price target of $50.50, suggesting some 15% gains from current levels of around $43.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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