Piper Sandler Likes Tyson Foods As A Reopening Play

Tyson Foods, Inc. TSN could be considered an economic reopening play due to the company's large exposure to the foodservice category, according to Piper Sandler.

The Tyson Foods Analyst: Michael Lavery upgraded Tyson Foods from Neutral to Overweight with a price target lifted from $70 to $77.

The Tyson Foods Thesis: A vaccine to combat the COVID-19 pandemic is expected within the coming weeks and this will help lift foodservice sales, Lavery wrote in the note. Specifically, 40% of Tyson's sales are exposed to the foodservice category.

While expectations for a complete recovery in the foodservice category might be unrealistic for now, it will remain elevated versus the earlier days of the pandemic. A vaccine and easing health crisis will also result in lower operational costs and disruptions for Tyson.

Related Link: The Impact Of COVID-19 On The Food And Beverage Supply Chain Could Be Long Lasting
Meanwhile, Lavery said the eat-at-home trends that dominated throughout the pandemic will remain "somewhat elevated.

At current levels, the foodservice category as a whole is not pricing in a foodservice recovery. Tyson in particular has seen its stock fall 11% from early February through Dec. 1. Other food companies with greater exposure to the at-home category have seen an average 14% increase over the same time period.

The research firm is revising its fiscal 2021 EPS estimate higher from $5.30 to $5.35 while 2022 EPS estimates are revised from $6.05 to $6.50.

TSN Price Action: Shares of Tyson Foods were trading higher by more than 2.9% at $68.03