Tyson Foods Stock Trading Around Fair Value, Analyst Upgrades Stock To Neutral

Piper Sandler analyst Michael Lavery upgraded the shares of Tyson Foods Inc TSN from Underweight to Neutral and maintained the price forecast of $58.

TSN reported a 9.1% Chicken EBIT margin in the first quarter, surpassing the analyst’s 6.5% forecast, marking its best quarter since the second quarter of FY2018.

The company achieved a Chicken order fill rate of over 98%, thanks to improvements in scheduling and execution that better aligned production with demand.

Tyson Foods also reduced waste in its plants. Both retail and food service segments are expanding, with strong performance in its value-added portfolio. Additionally, it reintroduced fully cooked products in retail during the first quarter.

The analyst forecasts a 7.4% Chicken EBIT margin for F25, though feed cost benefits are expected to diminish in later quarters.

Cattle supply remains limited, and price spreads are narrow, but prices have stayed high due to stronger-than-expected consumer demand, said the analyst.

The analyst anticipates that heifer retention may increase, which would be beneficial for herd rebuilding in the long run, but could reduce near-term supply and potentially pressure margins further.

On February 1, 2025, President Trump announced that the U.S. would impose a 25% tariff on all imports from Canada and Mexico, effective February 4, 2025.

However, U.S. and Mexico have agreed to postpone the tariffs for a month to focus on combating the fentanyl trade.

Related Read: Trump, Trudeau Strike Border Security Deal, Tariffs On Canada Paused For ‘At Least 30 Days’

Tyson Foods exports a limited amount of chicken products to Canada and sends around 2.5% of its pork sales, along with some chicken leg quarters, to Mexico. Additionally, it imports feeder cows and hogs from Canada.

Tyson Foods is prepared to adjust to any tariffs, with contingency plans in place to pivot to other markets quickly, opined the analyst.

While the analyst expects solid EBIT for the second and third quarters, the outlook for future quarters remains uncertain. The analyst has raised the FY25 EPS estimate from $3.45 to $3.93 but kept the FY26 EPS at $4.55 and the target price at $58.

Price Action: TSN shares are trading lower by 1.54% at $56.85 at the last check Tuesday.

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