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Category: Stock Market and Tyson Foods
Date: 19 November 2019 Stock Price: $89.98 We take a look at the 4th quarter 2019 earnings report of Tyson Foods, one of the world's largest food companies with brands such as Jimmy Dea, Wright and State Fair.
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About Tyson Foods
Tyson Foods, Inc. (NYSE: TSN) is one of the world’s largest food companies and a recognized leader in protein. Founded in 1935 by John W. Tyson and grown under three generations of family leadership, the company has a broad portfolio of products and brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidell’s®, ibp® and State Fair®. Tyson Foods innovates continually to make protein more sustainable, tailor food for everywhere it’s available and raise the world’s expectations for how much good food can do. Headquartered in Springdale, Arkansas, the company had 121,000 team members at September 29, 2018. Through its Core Values, Tyson Foods strives to operate with integrity, create value for its shareholders, customers, communities and team members and serve as a steward of the animals, land and environment entrusted to it.
Financial overview of Tyson Foods' 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise
- Sales: $10.884 billion (up from $9.999 billion for the same quarter of the previous year)
- Sales increased by 8.85% over the last 12 months
- Cost of sales: $9.745 billion (up from $8.660 billion for the same quarter of the previous year)
- Cost of sales increased by 12.5% over the last 12 months.
- Net income: $369 million (down from $537 million for the same quarter of the previous year)
- Diluted income per share: $1.01 (down from $1.47 for the same quarter of the previous year)
- PE ratio of Tyson Foods: 22.3
- Dividend declared: $0.338
- Dividend yield of Tyson Foods: 1.5%
- Diluted weighted number of shares outstanding: 367 million (unchanged from 367 million for the same quarter of the previous year)
- Cash and cash equivalents: $484 million
- Cash and cash equivalents per share: 1,31
- Cash and cash equivalents makes up 1.46% of Tyson Foods' market capital
- Cash and cash equivalents makes up 1.46% of Tyson Foods' total assets
- Receivables, net: $2.173 billion
- Receivables makes up 6.56% of Tyson Foods' total assets
- Inventories: $4.108 billion
- Inventories makes up 12.4% of Tyson Foods' total assets
- Stockholders equity in Tyson Foods: $14.226 billion
- Stockholders equity per share in Tyson Foods: $38.76
- Tyson Foods is trading at 2.32 times its stockholders equity which is within the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operations (for the full fiscal 2019): $2.513 billion
- Cash generated from operations per share (for the full fiscal 2019): $6.84
Tyson Foods (NYSE:TSN) management commentary on their 4th quarter 2019 earnings
Springdale, Arkansas – November 12, 2019 – Tyson Foods, Inc. (NYSE: TSN), one of the world’s largest food companies and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair, today reported the following results
“Fiscal 2019 was highlighted by significant progress in our strategy to grow our business through differentiated capabilities, deliver service and value to our customers, and sustain our company and our world for future generations,” said Noel White, Tyson Foods’ president and CEO. “We expanded our global footprint, launched innovation in our iconic brands and our new alternative protein brand, and prepared for future growth by investing in technology and infrastructure. “
“Fiscal 2019 was highlighted by significant progress in our strategy to grow our business through differentiated capabilities, deliver service and value to our customers, and sustain our company and our world for future generations,” said Noel White, Tyson Foods’ president and CEO. “We expanded our global footprint, launched innovation in our iconic brands and our new alternative protein brand, and prepared for future growth by investing in technology and infrastructure. “
Fiscal 2019 Highlights
Fourth Quarter Highlights
We’re very optimistic about fiscal 2020, and we currently expect to meet or exceed our long-term earnings algorithm of high single digit adjusted earnings per share growth as we’re well positioned to take advantage of opportunities in the global marketplace.”
Outlook For fiscal 2020
USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 2-3% from fiscal 2019 levels, but we expect export markets should absorb the increased production. The following is a summary of the outlook for each of our segments, as well as an outlook for capital expenditures, net interest expense, liquidity, tax rate and dividends for fiscal 2020. As our accounting cycle results in a 53-week year in fiscal 2020 as compared to a 52-week year in fiscal 2019, the fiscal 2020 outlook is based on a comparable 52-week year. Adjusted operating margin guidance is provided below on a non-GAAP basis .
- GAAP EPS of $5.52, down 33% from record prior year (prior year included a one-time tax benefit of $2.71)
- Adjusted EPS of $5.46, down 11% from record prior year
- GAAP operating income of $2,827 million; Adjusted operating income of $2,977 million
- GAAP operating margin of 6.7%; Adjusted operating margin of 7.0%
- Record Beef GAAP operating margin of 7.0% and Adjusted operating margin of 7.2%
Fourth Quarter Highlights
- GAAP EPS of $1.01, down 31% from prior year; Adjusted EPS of $1.21, down 23% from prior year
- GAAP operating income of $604 million; Adjusted operating income of $686 million
- Total Company GAAP operating margin of 5.5%; Adjusted operating margin of 6.3%
We’re very optimistic about fiscal 2020, and we currently expect to meet or exceed our long-term earnings algorithm of high single digit adjusted earnings per share growth as we’re well positioned to take advantage of opportunities in the global marketplace.”
Outlook For fiscal 2020
USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 2-3% from fiscal 2019 levels, but we expect export markets should absorb the increased production. The following is a summary of the outlook for each of our segments, as well as an outlook for capital expenditures, net interest expense, liquidity, tax rate and dividends for fiscal 2020. As our accounting cycle results in a 53-week year in fiscal 2020 as compared to a 52-week year in fiscal 2019, the fiscal 2020 outlook is based on a comparable 52-week year. Adjusted operating margin guidance is provided below on a non-GAAP basis .
- Beef – We expect industry fed cattle supplies to increase approximately 2% in fiscal 2020 as compared to fiscal 2019. We expect ample supplies in regions where we operate our plants. For fiscal 2020, we believe our Beef segments adjusted operating margin will be 6.5% to 7.5%, absent impacts from ASF.
- Pork – We expect industry hog supplies to increase approximately 3% in fiscal 2020 as compared to fiscal 2019. We expect increased livestock costs in fiscal 2020 as compared to fiscal 2019. For fiscal 2020, we believe our Pork segments adjusted operating margin will be 6% to 8%, absent impacts from ASF.
- Chicken – USDA projects a 2-3% increase in chicken production in fiscal 2020 as compared to fiscal 2019. For fiscal 2020, we believe our Chicken segments adjusted operating margin will be 6% to 8%, absent impacts from ASF.
- Prepared Foods – We expect raw material costs to rise in fiscal 2020 as compared to fiscal 2019, but we expect to recover the increased raw material costs through pricing. Many of our sales contracts are formula based or shorter-term in nature, but there may be a lag time for price changes to take effect. For fiscal 2020, we believe our Prepared Foods segments adjusted operating margin will be 10% to 12%.
- International/Other – International/Other includes our Keystone International operations, our Thai and European operations, our foreign operations in China, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC. We expect improved results in fiscal 2020 from improvement in our legacy foreign operations as well as the impact of a full year of Keystone International and our Thai and European operations.
- Capital Expenditures – For fiscal 2020, we expect capital expenditures to be approximately $1.3 billion. Capital expenditures will include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that are expected to result in production and labor efficiencies, yield improvements and sales channel flexibility.
- Net Interest Expense – We expect net interest expense to approximate $450 million for fiscal 2020.
- Liquidity – We expect total liquidity, which was approximately $1.2 billion at September 28, 2019, to remain above our minimum liquidity target of $1.0 billion.
- Tax Rate – We expect our adjusted effective tax rate to be around 23.5% in fiscal 2020.
- Dividends – Effective November 11, 2019, the Board of Directors increased the quarterly dividend previously declared on August 8, 2019, to $0.42 per share on our Class A common stock and $0.378 per share on our Class B common stock. The increased quarterly dividend is payable on December 13, 2019, to shareholders of record at the close of business on November 29, 2019. The Board also declared a quarterly dividend of $0.42 per share on our Class A common stock and $0.378 per share on our Class B common stock, payable on March 13, 2020, to shareholders of record at the close of business on February 28, 2020. We anticipate the remaining quarterly dividends in fiscal 2020 will be $0.42 and $0.378 per share of our Class A and Class B stock, respectively. This results in an annual dividend rate in fiscal 2020 of $1.68 for Class A shares and $1.512 for Class B shares, or a 12% increase compared to the fiscal 2019 annual dividend rate.
Tyson Foods (NYSE:TSN) stock price history
The image below obtained from Google, shows the stock price history of Tyson Foods (NYSE:TSN) for the last 5 years. Its been a pretty good time for Tyson stockholders over the last 5 years. 5 years ago the stock of Tyson was trading at $42.30 and its currently trading at $89.98 a stock. That's a healthy 112.7% return provided to Tyson Foods stockholders over the last 5 years.
Tyson Foods' stock is trading at a lot closer to its 52 week high of $94.11 than it is to its 52 week low of $49.77 which to us is a clear indication that the short term sentiment and momentum of Tyson Foods' stock is very positive.
Tyson Foods' stock is trading at a lot closer to its 52 week high of $94.11 than it is to its 52 week low of $49.77 which to us is a clear indication that the short term sentiment and momentum of Tyson Foods' stock is very positive.
Recent coverage of Tyson Foods
The extract below covers the latest regarding Tyson Foods as obtained from TheStreet.com
Shares of the nation's biggest poultry producers flew higher Thursday after U.S. trade officials confirmed China has lifted its ban on chicken imports. Sanderson Farms led the way up, with its stock price rising 4.01% to $166.28 a share after the Office of the U.S. Trade Representative announced the end of China's ban on sales of poultry produced by American farmers.
Tyson Foods (TSN - Get Report) rose 2.93% to $91.47 a share, while Pilgrim's Pride (PPC - Get Report) jumped 1.72% to $32.50. The move by China to lift the ban comes as part of a broader trade deal taking shape with the United States, which has agreed, in turn, to green light imports of cooked chicken and seafood from China. In addition, China is scrambling to fill the void created by the loss of a large swath of the nation's hogs after a devasting outbreak of the African swine fever.
Read the full article here
Shares of the nation's biggest poultry producers flew higher Thursday after U.S. trade officials confirmed China has lifted its ban on chicken imports. Sanderson Farms led the way up, with its stock price rising 4.01% to $166.28 a share after the Office of the U.S. Trade Representative announced the end of China's ban on sales of poultry produced by American farmers.
Tyson Foods (TSN - Get Report) rose 2.93% to $91.47 a share, while Pilgrim's Pride (PPC - Get Report) jumped 1.72% to $32.50. The move by China to lift the ban comes as part of a broader trade deal taking shape with the United States, which has agreed, in turn, to green light imports of cooked chicken and seafood from China. In addition, China is scrambling to fill the void created by the loss of a large swath of the nation's hogs after a devasting outbreak of the African swine fever.
Read the full article here
Tyson Foods (NYSE:TSN) stock valuation
So what do we value Tyson Foods stock at after their latest earnings report and their fiscal guidance provided? Based on their 4th quarter and full fiscal 2019 earnings report and their earnings guidance provided for their 2020 fiscal year our valuation model provides a target (full value) price for Tyson Foods stock at $90.90 a stock.
We therefore believe the stock of Tyson Foods is fully valued at its current price. We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $90.90. A good entry point into Tyson Foods would therefore be at $81.80 or below. We expect the stock of Tyson Foods to trade in a narrow range around our target (full value) price in coming weeks and months.
We therefore believe the stock of Tyson Foods is fully valued at its current price. We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $90.90. A good entry point into Tyson Foods would therefore be at $81.80 or below. We expect the stock of Tyson Foods to trade in a narrow range around our target (full value) price in coming weeks and months.
Next earnings release of Tyson Foods
It is expected that Tyson Foods will release their 1st quarter 2020 earnings report in mid February 2020