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Tyson Foods Inc Class A TSN

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Morningstar’s Analysis

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Economic Moat




No-Moat Tyson’s Recovery From the Pandemic Is on Track; Shares Offer Attractive Risk/Reward

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%.

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Company Profile

Business Description

Tyson Foods is the largest U.S. producer of processed chicken and beef. It's also a large producer of processed pork and protein-based products under the brands Jimmy Dean, Hillshire Farm, Ball Park, Sara Lee, Aidells, and State Fair, to name a few. Tyson sells 90% of its products through various U.S. channels, including retailers (45%), food-service (31%), and other packaged food and industrial companies (11%). In addition, 10% of the company's revenue comes from exports to Canada, Mexico, Brazil, Europe, China, and Japan. The remaining 3% of revenue is composed of intersegment sales.

2200 West Don Tyson Parkway
Springdale, AR, 72762-6999
T +1 479 290-4000
Sector Consumer Defensive
Industry Farm Products
Most Recent Earnings Sep 30, 2020
Fiscal Year End Oct 3, 2021
Stock Type High Yield
Employees 139,000