BMO Calls Tyson Foods One Of The Greatest Transformations In Its Coverage Group

Tyson Foods, Inc. TSN reported its F3Q16 results, with the EPS beating the consensus forecast. BMO Capital’s Kenneth B. Zaslow maintained a Market Perform rating on the company, while raising the price target to $77.

Tyson Foods reported F3Q16 EPS at $1.21, meaningfully ahead of the consensus expectations and reflecting “broad-based outperformance,” especially in chicken and beef.

The company also raised its FY2016 EPS guidance from $4.20-$4.30 to $4.40-$4.50, while issuing a high single digit EPS growth guidance for F2017.

“Despite confidence in its organic growth opportunities, TSN indicated it maintains balance sheet capability to acquire another Hillshire-sized deal,” Zaslow mentioned.

Transformation Story

The analyst believes Tyson Foods’ execution “continues to exemplify one of the greatest transformations across our coverage group in terms of structural operational improvements, balance sheet strength, and capital allocation.”

Earnings Growth

The company’s actions and favorable market conditions offer increased visibility into the earnings power approaching $5, reflecting persisting earnings growth in 2017, although a natural deceleration from the four year CAGR of 22 percent.

According to the BMO Capital report, “TSN continues to transform its chicken operation with strategic initiatives including an aggressive mix shift to value-added products, while it should benefit from favorable market conditions for both beef and pork, with ample supplies in 2017.”

Zaslow expects the company to generate top line growth in its Prepared Foods segment, with the reinvestment of synergies and support for new product launches.

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