Tyson Foods Faces Slow Recovery In Poultry, Credit Suisse Says In Downgrade

Tyson Foods, Inc. TSN is likely to face a tough year ahead, with its two major divisions — chicken and prepared foods — remaining under pressure due to oversupply and weak demand, according to Credit Suisse.

The Tyson Foods Analyst: Robert Moskow downgraded Tyson Foods from Outperform to Neutral and reduced the price target from $75 to $68.

The Tyson Foods Thesis: Tyson Foods suffers from poor contract negotiating power, as the chicken industry is oversupplied, and the food service channel faces soft demand, Moskow said in the Wednesday downgrade note. (See his track record here.)

The company’s earnings may be supported to some extent by strong margins in beef and pork, as these divisions have a backlog of cheap livestock accumulated during the COVID-19 outbreak, the analyst said. Yet the market seems unimpressed by these commoditized businesses, as was evident from the “tepid reaction to the earnings beat” in the third quarter, he said.

Moskow said he expects weakness in chicken to continue into the September quarter given the decline in prices. The shift to retail has caused “significant operating inefficiencies,” he said. 

“Looking ahead, we believe that the 3.6% increase in the broiler hatching flock and competition from rising beef and pork supplies will hurt Tyson’s pricing power in chicken.”

TSN Price Action: Shares of Tyson Foods were down 0.92% at $4.52 at last check Wednesday. 

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