Tyson Tops 4Q Results But Sees COVID-19 Headwinds Ahead; Analyst Raises PT

Tyson Foods delivered 4Q earnings of $1.81 per share, which rose 50% year-over-year and came ahead of the Street’s estimates of $1.19 per share. The meat manufacturer’s 4Q sales of $11.5 billion increased from $10.9 billion last year and topped analysts’ expectations of $11.01 billion. Tyson shares closed 3.8% higher on Monday.

Don't Miss our Black Friday Offers:

Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

During the quarter, Tyson (TSN) incurred COVID-19-related expenses of $200 million. Meanwhile, the company’s adjusted operating income increased 40% year-over-year. The company also managed to reduce debt by $690 million in 4Q.

As for fiscal 2021, the company anticipates its revenue to be in the range of $42 billion to $44 billion, compared to analysts’ estimates of $44.09 billion. Tyson expects its beef and pork segments to remain strong but not at fiscal 2020 levels. In addition, the company sees its chicken and prepared foods segments to remain stronger in fiscal 2021 compared with fiscal 2020 levels. However, Tyson cautioned that COVID-related challenges are “anticipated to increase our operating costs and negatively impact our volumes into fiscal 2021.” (See TSN stock analysis on TipRanks).

On Nov. 13, the company raised its quarterly dividend to $0.445 per share on Class A common stock and $0.4005 per share on Class B common stock, which will be paid on Dec. 15 to shareholders of record as of Dec. 1. Tyson expects dividend payout to remain the same in fiscal 2021, which implies an annual dividend of $1.78 for Class A shares and $1.602 for Class B shares in fiscal 2021. The current dividend yield is 2.69%.

On Nov. 17, Piper Sandler analyst Michael Lavery raised the stock’s price target to $70 (8.1% upside potential) from $63, amid expectations that the potential of an effective COVID-19 vaccine and a reopening of the economy will benefit Tyson. However, Lavery maintained a Hold rating on the stock, amid concern about Tyson’s foodservice division in fiscal 2021, as the food-at-home trend continues.

Currently, the Street has a cautiously optimistic outlook on the stock with a Moderate Buy analyst consensus. The average price target stands at $70 implying upside potential of about 8.1% to current levels. Shares have declined by about 28.9% year-to-date.