BMO: Tyson Foods Posts Q2 Beat On Stellar Performance In Prepared Foods

Tyson Foods, Inc. (NYSE: TSN) reported second-quarter EPS ahead of expectations, reiterated its full-year guidance and provided a favorable 2020 outlook, according to BMO Capital Markets.

The Analyst

Kenneth Zaslow maintained an Outperform rating on Tyson Foods with an unchanged $90 price target. 

The Thesis

Tyson Foods reported its second-quarter EPS of $1.47, backed by solid performance in prepared foods, a decent performance in the chicken segment and a lower tax rate that was partially offset by slightly disappointing beef performance, Zaslow said in a Tuesday note. (See his track record here.) 

The food company reiterated its full-year 2019 EPS guidance of $5.75-$6.10, which reflects a lower tax rate and further improvement in prepared foods, the analyst said. 

The company’s outlook for 2020 is positive, indicating margins of more than 7% for beef, over 6% for pork and chicken and more than 12% for prepared foods, he said. 

Zaslow quoted the company as saying “there’s upward potential, in some cases,” and “sizable upward potential in some of our segments” from African swine fever.

The analyst named Tyson Foods a “top pick” for 2019 and said the company’s “earnings power, strong cash flow, attractive valuation, and optionality associated with African swine fever create a compelling investment opportunity.”

BMO raised its 2019 EPS estimate to $6, reflecting better margins at prepared foods, and said the company could exceed $6.50 in EPS and $2 billion in cash flow in 2020 from improving fundamentals, acquisitions and the effect of African swine fever on the market. 

Price Action

Tyson foods shares were down 0.3% at $83.58 at the time of publication Tuesday. 

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