Is The Market Pricing Tyson Foods Inc Fairly?

by Trefis Team
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Tyson Foods Inc (NASDAQ: TSN), is one of the world’s largest processed food companies and a recognized leader in protein. During the recent annual earnings the company’s revenue grew by 3.7% y-o-y for the full year, with sales for 2017 at $38.2 billion, driven by growth across all its segments and major contribution from Beef and Pork.  At the same time, Tyson was focused on protein packed brands and had initiated the divestiture of some non-protein businesses. In order to expand their manufacturing capabilities in sandwiches and other prepared foods, and to increase their presence in the convenience store channel, they acquired AdvancePierre Foods.  For 2018, the management is focused on execution, ongoing improvements in top-line growth, and continuing actions to expand margins. The company further plans to grow their business through continuous improvement and sustain their company as they sustainably feed the world with the fastest growing portfolio of protein packed brands.

We anticipate the company to post progressive results in the future as the management remains focused on keeping consumer relevance, customer growth, and shareholder value creation at the forefront. Our price estimate of $79 is dependent on a FY18 sales forecast of $40.6 bn, up 6% from $39.3 bn last fiscal. We also expect TSN’s net income margin to be ~6.0 % from 4.6% in FY 2017.  We expect a Price-to-Earnings multiple of 12.11 and an average share count of 370 mn giving a share price estimate of $79, roughly  18% above its current market price.
Our revenue estimate of $40.6 bn for FY2018 is arrived at by projecting revenues for each individual segment of the Company: Chicken, Beef, Pork, and Prepared Foods and Others that represents total net sales, and following historical growth trends and the percentage contribution of each segment to total to the company’s top line.

The P/E multiple is also forecast taking into account the historical data and its likely trend. Detailed steps to arrive at our price estimate are outlined in our interactive dashboardYou can modify our assumptions to arrive at your own price estimate for the company.


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