Tyson Foods Inc. ATSN

Morningstar Rating

Stock Research and Analysis

by Ann Gilpin

Tyson Foods is the world's largest meat company and has considerable scale in beef, chicken, and pork processing. As a meat processor, however, Tyson is exposed to significant commodity volatility for both its inputs and eventual products, which can Read more

Bulls Say

Tyson is one of the leading processors of beef products in the U.S., with 22% share of the domestic beef market.

Tyson is the second-largest domestic chicken processor, with 20% share of the U.S. market. The leading competitor, Pilgrim's Pride, has 22% market share, with the rest of the industry fairly fragmented.

Tyson is the second-largest domestic producer of pork, with 18% share of the market. Together, Tyson and industry leader Smithfield hold about 46% of the fragmented U.S. pork processing market.

Tyson's well-recognized brand name provides it with some advertising leverage, as the firm uses its name across all three business lines rather than supporting a multitude of brands.

Tyson’s new CEO is acutely focused on cutting production and returning the chicken segment to profitability. Read more

Bears Say

Tyson is a no-moat company with thin margins, and returns on invested capital have lagged our estimate of the firm’s cost of capital.

Increased ethanol production in the U.S. has pushed corn and other grain prices higher over the past few years, and animal feed (which consists mostly of grains) is Tyson's single-largest input cost.

Despite its movement up the value chain into packaged meats, the company's short-term operating profits can still be affected by the boom and bust cycle of commodity prices.

Demand for the firm’s products, especially in export markets, can decline sharply due to outbreaks of avian flu, swine flu, or mad cow disease.

Retired chairman Don Tyson controls 70% of the voting stock of the firm, and the family's use of corporate cash for personal perks has put minority shareholders at a distinct disadvantage. Read more

Strategy

Tyson has focused on offsetting higher grain prices by investing in higher-margin innovative products such as microwavable meals. International expansion continues to be a goal for the firm, especially Read more

Management

While we are pleased to see management changes at the head of Tyson, we still have many concerns with the firm’s corporate governance. Donnie Smith serves as Tyson’s new CEO after Dick Bond was ousted at the beginning of 2009. Bond received a nice financial Read more

Profile

Tyson Foods is a world leader in processing and marketing beef, chicken, and pork products. The beef business is the largest segment, making up about 40% of the firm's revenue. Read more

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