Analyst Note| Rebecca Scheuneman, CFA |
No-moat Tyson’s fiscal fourth-quarter results reinforce our conviction in our $86 fair value estimate, and we suggest investors build positions. Despite $540 million (125 basis points) in direct COVID-19 costs in fiscal 2020 to cover bonuses, protective equipment, sanitation, testing, plant downtime, etc., the company delivered a 30-basis-point increase in adjusted operating margins to 7.4%, topping our 6.7% estimate. The improvement was driven by strong results in the beef and pork segments, as production disruptions drove the cost for livestock lower and prices for processed meat higher. Fiscal 2020 sales increased 2% to $43.2 billion, modestly better than our $43.1 expectations, although excluding acquisitions and a 53rd week, sales fell about 2%.