Tyson Foods' Chicken Unit to Gain From Humboldt Facility

Tyson Foods, Inc. TSN responds to the rising consumer demand for chicken products by frequently undertaking initiatives to expand poultry production capacity. The company recently announced plans to develop a chicken production complex in the City of Humboldt, in western Tennessee.

This facility development project is valued at approximately $300 million. Upon completion of this project in late 2019, it is expected to create approximately 1,500 local jobs. The facility will primarily be engaged in the production of pre-packaged trays of fresh chicken and along with a capacity to process 1.25 million birds per week.

In August 2017, the company announced making investments of $84 million for the expansion of the Union City facility in Tennessee. Operations at the facility are also expected to create 300 new jobs.

Tyson Foods has been operating quite successfully in Tennessee for the past many years and has been undertaking initiatives to improve poultry production in the region. The company currently has four operational facilities in the state, with around 5,000 workers.

Rising Demand for Chicken & Protein-Packed Products Bodes Well

Increasing consumer preference for chicken products is well reflected in the company’s fourth-quarter 2017 results. Sales from the Chicken segment improved 8% year over year to reach $3,035 million, while sales volume expanded 4.1%. The company’s ongoing capacity expansion initiatives in Tennessee are expected to further augment the Chicken segment’s performance in the upcoming quarters.

Further, Tyson Foods’ Prepared Foods segment also benefits from increased consumer demand for protein-packed and fresh food offerings. Sales volume in the Prepared Foods segment increased 9.5% during the fourth quarter. The company frequently undertakes acquisitions to expand the Prepared Foods portfolio. We note that positive synergies from the buyout of AdvancePierre have been driving the segment for a while. Moreover, the company recently announced the buyout of Original Philly Holdings which is expected to enhance offerings in the Prepared Foods category.

The company’s food product expansion endeavors are also in line with the USDA expectations. For fiscal 2018 the USDA expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year. Owing to such trends in the food industry, Tyson Foods has been divesting non-protein businesses and allocating resources toward more profitable segments in the areas of chicken and beef products as well as other fresh food offerings.

 

 

The company’s strategic initiatives have led to sturdy performance in its food segments. As a result, this Zacks Rank #1 (Strong Buy) company’s share have returned 35.3% in the past six months, compared with the industry’s rally of 21.4%.

Looking For More Consumer Staple Stocks? Check These

Investors interested in the same sector may also consider stocks such as McCormick & Company, Inc MKC, US Foods Holding Corp. USFD and Inter Parfums Inc IPAR. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McCormick delivered an average positive earnings surprise of 4% in the trailing four quarters. It has a long-term earnings growth rate of 9.4%.

US Foods Holding came up with an average positive earnings surprise of 6.1% in the trailing four quarters. It has a long-term earnings growth rate of 15.1%.

Inter Parfums delivered an average positive earnings surprise of 19% in the trailing four quarters. It has a long-term earnings growth rate of 12.3%.

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