Tyson Foods (TSN) - Get Tyson Foods, Inc. Class A Report and Sanderson Farms (SAFM) - Get Sanderson Farms, Inc. Report on Friday were upgraded to overweight from neutral by a JPMorgan analyst, who said consumers' desire stock up on food due to the coronavirus pandemic has resulted in meat "flying off the shelves."
At last check shares of Tyson, Springdale, Ark., were 8.5% higher at $58.82, while Sanderson Farms, Laurel, Miss., was up 1.3% at $128.40.
Analyst Ken Goldman said in a note to clients that based on conversations with chicken processors, "outstanding retail demand for meat is more than offsetting soft demand at food service."
"We visited a number of supermarkets both in New York and California in the last week; in every location chicken was extremely scarce and in some the entire meat case was largely picked clean," Goldman said.
"This anecdotal research was supported by our discussions yesterday with meat processors, where the tone was extremely constructive; one senior manager said meat is 'flying off the shelves' in grocery stores."
Goldman added that "at some point (we hope), Covid-19 will fade and consumers will realize they have a year’s supply of canned soup, snack bars, etc., in their pantries."
"They also may have plenty of chicken and beef, but these are perishable products (read: they either have to be eaten within a couple of weeks or frozen)," he said.
"True, meat freezes reasonably well; however, most homes do not have a lot of freezer space. Therefore, the ability of consumers to pantry-load chicken, pork and beef is limited, and the echo effect of today’s higher-than-usual purchases of meat should be somewhat limited."
While the situation is fluid, Goldman said that "for now, we think the day-to-day bottom lines of SAFM and TSN probably are being boosted by Covid-19, not the opposite."