Got Beef? Tyson Food's Show-Me Story Boosted By Cattle Margins

Shares of Tyson Foods, Inc. TSN gained more than 7 percent on Friday after the company revised its earnings outlook higher.

Tyson revised its full year earnings per share guidance from a prior range of $4.95 to $5.05 to a new range of $5.20 to $5.30 per share. Looking forward to the next fiscal year, management guided its full year fiscal 2018 earnings per share to a range of $5.70 to $5.85 which came in ahead of the $5.35 per share Wall Street analysts were expecting.

The company's fiscal 2018 guidance implies that it can achieve a long-term prepared foods margin target of 12 to 14 percent sooner than expected, Mizuho Securities' Jeremy Scott said in a Friday note. A 14 percent margin rate and $1.3 billion in EBITDA was expected  by the end of 2020, but could now become a reality in fiscal 2019. (See Scott's track record here.)

Tyson also pre-announced its fourth quarter fiscal 2017 earnings per share in the range of $1.32 to $1.42 per share, which also came in above management's prior guidance of $1.07 to $1.17 per share. Of particular note in the quarter, beef packer margins have been "phenomenal, and a stronger pipeline of cattle available near Tyson's plants should drive above-normalized margins into 2018."

Scott maintains a Buy rating on Tyson Foods' stock with an unchanged $76 price target.

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