12-16-2011: Tyson Foods, Inc. (TSN): Strongest of the Domestic Meat Foods Processors

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Recommendation

Tyson Foods, Inc.

When it comes to chicken, we feel Tyson Foods, Inc. (TSN) makes a product superior to many of its competitors like say, Foster Farms. Chick-a-fil in the fast food service industry agrees with us. Tyson's headquarters is located near Wal-Mart's and these two corporations enjoy a close relationship. Yet we are given to wonder why Wal-Mart offers Tyson's less high-quality (uncooked and un-microwavable) products when most grocery chains offer the higher-end pre-cooked variety for about $1 more per package. But our confidence in Tyson was somewhat lessened when we realize it made a major acquisition of Iowa Beef Processors in order to become a major player in the beef and pork industry. For several years prior to the acquisition, Iowa Beef Processors had a reputation for unsafe practices, recalls of e-coli-contaminated meats, inhumane practices toward animal slaughter, and incidents of worker safety violations. It got so bad toward the end, Iowa Beef's profits were affected by forced plant shutdowns and other fines and penalties. From what we can see from the news, the situation hasn't changed all that much at the former Iowa Beef plants, as worker injuries and recalls of products seem to be continuing. But it doesn't seem to have put much of a dent in Tyson's earnings. What does have the potential to put a dent there is high grain prices.

The first thing we noted was an inability on our part to find any "Chairman's Letter to Stockholders" for the past two years. The passing of previous CEO Don Tyson and his replacement before his death by "Donnie" Smith may have had something to do with this and a different management style.

The stock of this company is in a definite channel formation, and the company's size, coupled with its being near the top of the channel (or "rolling stock") formation suggests to us it is an ideal candidate for buying puts. Food processors have been having a hard time of late due to economic conditions and increased costs, although so far Tyson seems to be surviving well by simply increasing prices. Demand elasticity puts a limit on this solution, however.

The company does have some strong fundamentals, at least according to researchers, analysts, and the Zenith Index. We probably should have added a test for degree of intangibles in our Zenith Index test however, as the company is carrying a lot of goodwill on its books. It also appears to have a cash flow problem of late.

Tyson has a recent ongoing partnership with a biofuels corporation and is moving into the area of converting animal waste into fuels that can be used even for aircraft jet fuel. The profitability from this venture is limited. In the past, Tyson has diversified into other areas only to refocus on its core business, selling off interests in failed attempts in non-core areas. In its "Management's Discussion" it clearly now focuses on three main segments, poultry, beef, and pork.

Tyson has a growing worldwide presence, especially in China, India, and Brazil.

The stock pays a small dividend (0.80%) and has a p/e of 11, making it one of the most desirable of the foods-meats stock groups. The group as a whole, however, is weak of late.

Executives there are clearly over-compensated, while the company has demonstrated a willingness to close plants and lay off workers in America when expedient to do so. 



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Under current market conditions, a Zenith Index Score of 1.20 or above is required for a positive rating on this factor. 1.21 -1.30 is considered acceptable, 1.30-1.40 is consider strong and > 1.40 is considered exceptionally strong. Accounting statements in this section often contain mistakes, especially in earlier years' totals, but data is deemed sufficient for us to give a rating. More accurate financial statements follow in the next section.

Tyson Foods Inc.                 (TSN  )    Sector: Consumer Goods
2200 Don Tyson Parkway           Industry: Meat Products
Springdale, AR 72762-6999        Exchange: NYSE

Tyson Foods, Inc., together with its subsidiaries, engages in the
production, distribution, and marketing of chicken, beef, pork, prepared
foods, and related allied products worldwide. The company-Ęs Chicken
segment involves in breeding and raising chickens, as well as processing
live chickens into fresh, frozen, and value-added chicken products. Its
Beef segment processes live fed cattle, and fabricates dressed beef
carcasses into primal and sub-primal meat cuts and case-ready products.
The company-Ęs Pork segment involves in the processing live market hogs,
and fabricating pork carcasses into primal and sub-primal cuts and
case-ready products. Its Prepared Foods segment manufactures and markets
frozen and refrigerated food products, such as pepperoni, bacon, beef and
pork pizza toppings, pizza crusts, flour and corn tortilla products,
appetizers, prepared meals, ethnic foods, soups, sauces, side dishes, meat
dishes, and processed meats. The company markets and sells its products to
grocery retailers and wholesalers, meat distributors, warehouse club
stores, military commissaries, industrial food processing companies, chain
restaurants or their distributors, international export companies, and
domestic distributors, as well as to foodservice operations, such as plant
and school cafeterias, convenience stores, hospitals, and other vendors.
Tyson Foods, Inc. also markets its allied products to pharmaceutical and
technical products manufacturers, and pork processors. The company was
founded in 1935 and is headquartered in Springdale, Arkansas.

Last Trade:  20.39                     52-Week Range:  20.74 -  15.60
Trade Date:  12-15                     Avg. Volume:  3,696,810 Shares
Index Membership:                                  Employees: 115,000

Corporate Governance:
    Audit (Low Concern), Board (Low Concern), Compensation
    (Medium Concern), Shareholder Rights (Low Concern).

     EPS:   1.97     Dividend Amount: $  0.16       Yield:         0.80%
                    Ex-Dividend Date: Feb 28, 20  Mkt Cap: $  7,530,000K
                        Payout Ratio:  8.00%

     Last Split Factor (new for old): 3:2      Split Date: Feb 18, 19

Key Statistics:

Enterprise Value: $  8,840,000K           Revenue (ttm)  : $ 32,270,000K
                                             Gross Profit: $  2,200,000K
Earnings before Income Tax, Depreciation and Amortization: $  1,790,000K

Enterprise Value/Revenue (ttm):  0.27           Revenue per Share: $   86.50
Enterprise Value/EBITDA (ttm):   4.93       Qtrly Rev Growth (y to y): 12.90%


P/E Ratio (fwd projected):  8.52      P/E Ratio (current):  10.34

P/E Growth Ratio (5 yr expected):  1.31  Operating Margin:    3.98%
               Price/Sales Ratio:  0.23     Profit Margin:    2.32%
                Price/Book Value:  1.30        Book Value: $ 15.29/sh.

Return on Assets:   7.36%        Net Income Avl to Common: $   750,000K
Return on Equity:  13.39%          Diluted Earnings/Share:     $  1.97
                              Qrtly Earnings Growth (yoy):      -54.50%

Balance Sheet Items :                   Cash Flow Items (ttm):
(most recent qrtr)                      (trailing 12 mo.)

       Total Cash: $    716,000K        Operating Cash Flow:$  1,050,000K
       Total Debt: $  2,180,000K        Lvgd Free Cash Flow:$    281,880K
Total Debt/Equity:        38.38
 Total Cash/Share:      $  1.94
    Current Ratio:         2.01

Share Statistics:                       Stock Price History:

    Shares Outstanding:  369,790K       Stk 52-Week Change:  14.02%
                 Float:  291,700K       S&P 500 52-Wk Chng:  -2.50%
  Sh. Short % of Float:     4.40%        50-Day Moving Avg:  19.66
           Short Ratio:     3.90        200-Day Moving Avg:  18.21
% Held by Institutions:    69.60%                     Beta:   0.71
    % Held by Insiders:     2.08%

Analysts' Estimates:               Cur. Qtr   Next Qtr  Cur. Year  Next Year
___________________________          Dec 11     Mar 12     Sep 12     Sep 13

  Average Earnings Estimate           0.35       0.48       2.10       2.39
  Average Revenue  Estimate           250M     8,520M    34,270M    35,430M

Factors Comparing This Company to Its Industry Leader (1.0 = Average):

Long Term EPS Growth Rate (5 yr):   2.400      EPS Growth (Qrtly YoY):   2.000
  PEG Ratio (ttm, 5 yr expected):   6.000             P/E Ratio (ttm):   1.159
      Revenue Growth (Qrtly YoY):   3.000


Annual Income Statements:                          All numbers in thousands)
  Period Ending                          Oct1, 2011   Oct2, 2010   Oct3, 2009

  Total Revenue                         32,266,000   28,430,000   26,704,000
  Cost of Revenue                       30,067,000   25,916,000   25,501,000
  Gross Profit                           2,199,000    2,514,000    1,203,000

Operating Expenses:
  Research & Development                         0            0            0
  Selling, General & Administrative        914,000      929,000      858,000
  Non-Recurring Expenses                         0       29,000      560,000
  Other Operating Expenses                       0            0            0
  Total Operating Expenses                       0            0            0
  Operating Income or Loss               1,285,000    1,556,000     -215,000

Income from Continuing Operations:
  Total Other Income/Expenses Net           31,000       -6,000       -1,000
  Earnings Before Interest & Taxes       1,316,000    1,550,000     -216,000
  Interest Expense                         242,000      347,000      327,000
  Income Before Taxes                    1,074,000    1,203,000     -543,000
  Income Tax Expense                       341,000      438,000        7,000
  Minority Interest                         17,000       15,000        4,000
  Net Income from Continuing Op.s          733,000      765,000     -550,000

Non-recurring Events:
  Discontinued Operations                        0            0       -1,000
  Extraordinary Items                            0            0            0
  Effect of Accounting Changes                   0            0            0
  Other Items                                    0            0            0
  Net Income                               750,000      780,000     -547,000

  Preferred Stock & Other Adjustmnts            0            0            0
  Net Income Avail To Common Shares        750,000      780,000     -547,000


Quarterly Income Statements:                           All numbers in thousands)
  Period Ending                   Oct1, 2011  Jul2, 2011  Apr2, 2011  Jan1, 2011

  Total Revenue                    8,404,000   8,247,000   8,000,000   7,615,000
  Cost of Revenue                  8,013,000   7,716,000   7,467,000   6,871,000
  Gross Profit                       391,000     531,000     533,000     744,000

Operating Expenses:
  Research & Development                   0           0           0           0
  Selling, General & Adminis.        219,000     219,000     230,000     246,000
  Non-Recurring Expenses                   0           0           0           0
  Other Operating Expenses                 0           0           0           0
  Total Operating Expenses                 0           0           0           0
  Operating Income or Loss           172,000     312,000     303,000     498,000

Income from Continuing Operations:
  Total Other Income/Expenses Net      8,000       9,000       1,000      13,000
  Earnings Before Int. & Taxes       180,000     321,000     304,000     511,000
  Interest Expense                    55,000      58,000      63,000      66,000
  Income Before Taxes                125,000     263,000     241,000     445,000
  Income Tax Expense                  30,000      75,000      85,000     151,000
  Minority Interest                    2,000       8,000       3,000       4,000
  Net Income from Continuing Op.s     80,000     196,000     159,000     298,000

Non-recurring Events:
  Discontinued Operations                  0           0           0           0
  Extraordinary Items                      0           0           0           0
  Effect of Accounting Changes             0           0           0           0
  Other Items                              0           0           0           0
  Net Income                          97,000     196,000     159,000     298,000

  Preferred Stock & Other Adj.s            0           0           0           0
  Net Income Avail To Common Shs      97,000     196,000     159,000     298,000


Annual Balance Sheets:                                All Numbers in Thousands
  Period Ending                       Oct1, 2011     Oct2, 2010     Oct3, 2009
Current Assets:
  Cash & Cash Equivalents                716,000        978,000      1,144,000
  Short Term Investments                       0              0              0
  Net Receivables                      1,321,000      1,198,000      1,100,000  Inventory                            2,587,000      2,274,000      2,009,000
  Other Current Assets                   156,000        168,000        122,000
  Total Current Assets                 4,780,000      4,618,000      4,375,000

  Long-Term Investments                        0              0              0
  Property, Plant & Equipt             3,823,000      3,674,000      3,576,000
  Goodwill                             1,892,000      1,893,000      1,917,000
  Intangible Assets                      149,000        166,000        187,000
  Accumulated Amortization                     0              0              0
  Other Assets                           427,000        401,000        540,000
  Deferred Long Term Asset Charges             0              0              0
  Total Assets                        11,071,000     10,752,000     10,595,000

Current Liabilities:
  Accounts Payable                     1,264,000      1,110,000      1,013,000
  Short/Current Long Term Debt            70,000        401,000        219,000
  Other Current Liabilities            1,040,000      1,034,000        761,000
  Total Current Liabilities            2,374,000      2,545,000      1,993,000

  Long Term Debt                       2,112,000      2,135,000      3,258,000
  Other Liabilities                      476,000        486,000        539,000
  Deferred LT Liability Charges          424,000        321,000        309,000
  Minority Interest                       28,000         35,000         33,000
  Negative Goodwill                            0              0              0
  Total Liabilities                    5,414,000      5,522,000      6,132,000

Stockholder Equity:
  Misc. Stocks Options Warrants                0         64,000         65,000
  Redeemable Perferred Stock                   0              0              0
  Preferred Stock                              0              0              0
  Common Stock                            39,000         39,000         39,000
  Retained Earnings                    3,801,000      3,113,000      2,399,000
  Treasury Stock                        -365,000       -229,000       -242,000
  Capital Surplus                      2,261,000      2,243,000      2,236,000
  Other Stockholder Equity               -79,000              0        -34,000
  Total Stockholder Equity             5,657,000      5,166,000      4,398,000
  Net Tangible Assets                  3,616,000      3,107,000      2,294,000


Quarterly Balance Sheets:                               All Numbers in Thousands
  Period Ending                Oct1, 2011   Jul2, 2011   Apr2, 2011   Jan1, 2011
Current Assets:
  Cash & Cash Equivalents         716,000      981,000      794,000    1,122,000
  Short Term Investments                0            0            0            0
  Net Receivables               1,321,000    1,334,000    1,256,000    1,180,000
  Inventory                     2,587,000    2,711,000    2,730,000    2,489,000
  Other Current Assets            156,000      146,000      157,000      162,000
  Total Current Assets          4,780,000    5,172,000    4,937,000    4,953,000

  Long-Term Investments                 0            0            0            0
  Property, Plant & Equipt      3,823,000    3,802,000    3,762,000    3,714,000
  Goodwill                      1,892,000    1,895,000    1,895,000    1,894,000
  Intangible Assets               149,000      158,000      161,000      163,000
  Accumulated Amortization              0            0            0            0
  Other Assets                    427,000      461,000      471,000      466,000
  Deferred LT Asset Charges             0            0            0            0
  Total Assets                 11,071,000   11,488,000   11,226,000   11,190,000

Current Liabilities:
  Accounts Payable              1,264,000    1,193,000    1,126,000    1,212,000
  Current Portion LT Debt          70,000      362,000      390,000      424,000
  Other Current Liabilities     1,040,000    1,206,000      963,000    1,009,000
  Total Current Liabilities     2,374,000    2,761,000    2,479,000    2,645,000

  Long Term Debt                2,112,000    2,094,000    2,105,000    2,124,000
  Other Liabilities               476,000      457,000      500,000      520,000
  Deferred LT Liab. Charges       424,000      393,000      389,000      354,000
  Minority Interest                28,000       31,000       39,000       39,000
  Negative Goodwill                     0            0            0            0
  Total Liabilities             5,414,000    5,736,000    5,512,000    5,682,000

Stockholder Equity:
  Misc. Options, WarrantS               0            0       65,000       63,000
  Redeemable Perferred Stock            0            0            0            0
  Preferred Stock                       0            0            0            0
  Common Stock                     39,000       39,000       39,000       39,000
  Retained Earnings             3,801,000    3,719,000    3,538,000    3,395,000
  Treasury Stock                 -365,000     -276,000     -197,000     -226,000
  Capital Surplus               2,261,000    2,257,000    2,252,000    2,245,000
  Other Stockholder Equity        -79,000       13,000       17,000       -8,000
  Total Stockholder Equity      5,657,000    5,752,000    5,649,000    5,445,000
  Net Tangible Assets           3,616,000    3,699,000    3,593,000    3,388,000


Annual Cash Flow:                                    All Numbers in Thousands
  Period Ending                      Oct1, 2011     Oct2, 2010     Oct3, 2009

  Net Income                            750,000        196,000       -547,000
Operating Activites:
  Depreciation                          506,000        497,000        513,000
  Adjustments to Net Income             153,000        159,000        631,000
  Changes in Accounts Recv'bls         -114,000        -79,000        137,000
  Changes in Liabilities                 98,000         44,000       -243,000
  Changes in Inventories               -299,000       -239,000        493,000
  Changes in Other Op'ing Actv's              0        285,000        -20,000
  Total Cash Flow fr Operations       1,046,000      1,432,000        960,000

Investing Activities:
  Capital Expenditures                 -643,000       -550,000       -368,000
  Investments                           -29,000         -4,000         19,000
  Other Cash Flows fr Investing               0         54,000        -78,000
  Total Cash Flows fr Investing        -644,000       -500,000       -427,000

Financing Acitivies:
  Dividends Paid                        -59,000        -59,000        -60,000
  Sale or Purchase of Stock            -273,000        -48,000        -19,000
  Net Borrowings                       -385,000       -894,000        347,000
  Other Cash Flows fr Financing               0         42,000          6,000
  Total Cash Flows fr Financing        -658,000       -959,000        215,000

  Effect of Exchange Rate Change         -6,000          1,000          6,000
  Change in Cash & Cash Equiv.s        -262,000        -26,000        754,000


Quarterly Cash Flow:                                   All Numbers in Thousands
  Period Ending                  Oct1, 2011  Jul2, 2011  Apr2, 2011  Jan1, 2011

  Net Income                         97,000     196,000     159,000     298,000

Operating Activites:
  Depreciation                      122,000     128,000     128,000     128,000
  Adjustments to Net Income          68,000     -15,000      41,000      59,000
  Changes in Accounts Recv'bls     -114,000           0           0           0
  Changes in Liabilities             98,000           0           0           0
  Changes in Inventories           -299,000           0           0           0
  Changes in Other Oper'g Acts            0     131,000    -442,000    -110,000
  Total Cash Flow f Operations      360,000     432,000    -117,000     371,000

Investing Activities:
  Capital Expenditures             -174,000    -150,000    -161,000    -158,000
  Investments                        50,000       1,000      -1,000     -79,000
  Other Cash Flows fr Investing           0       1,000       2,000      23,000
  Total Cash Flows fr Investing    -173,000     -97,000    -160,000    -214,000

Financing Acitivies:
  Dividends Paid                    -14,000     -15,000     -15,000     -15,000
  Sale or Purchase of Stock        -163,000     -89,000     -14,000      -7,000
  Net Borrowings                   -322,000       2,000     -64,000      -1,000
  Other Cash Flows fr Financing      16,000       7,000      35,000      10,000
  Total Cash Flows fr Financing    -441,000    -146,000     -58,000     -13,000

  Effect of Exchange Rate Chg             0           0           0      -2,000
  Change in Cash & Cash Equiv.     -265,000     187,000    -328,000     144,000


TSN    Tyson Foods Inc.                   [Indices near +3.0 or near zero,
                                          or < zero bear special attention.]
P/E Ratio Tests:
Current P/E Ratio < 28?    2.7079       P/E Ratio > 5?             1.0000
P/E Ratio Vs Growth Rate:  1.9300       Forward P/E Ratio < 28?    3.0000

Sales Tests:
Price/Sales Ratio < 2.3?   3.0000       Inventory/Sales < 5%?      0.6236
Sales < $1 billion?        0.0310       Operating Margin < 7.5%?   1.8844

Balance Sheet Tests:
Debt/Equity < 0.40?        0.0104       Long-Term Debt Service:    2.6785
LTD Being Reduced?         2.4000       Short-Term Debt Service:   3.0000
Current Ratio > 2?         1.0050       Working Capital >= 1.5?    0.9933
Leverage Ratio < 20%?      0.9363       Debt / Assets < 1?         3.0000
Quick Ratio > 1?           0.8580       Inventory Turnover > 1?    3.0000
Shares Out Decreasing?     3.0000       Market Cap.> 1.5 Billion?  0.1992
                                        Profit Margin > 7.5%?      0.3093
Income Tests:
Dividend Yield > 2.0%?     3.0000       EPS Annual Growth > 10%?   1.1100
Enterprise Value/Revenue:  0.1800       EPS 5-yr Growth > 20%?     3.0000
Enterprise Value/EBITDA:   0.7043       EPS Growth Consistent?     1.2000
EPS Qrtly Growth > 10%?   -3.0000       Collection < 45 days?      3.0000
Rev. Qtrly Growth > 15%?   1.9350       Gross Pft/Cur. LTD < 1?    3.0000
EPS Annual Growth > 10%?   1.1100       Borrowing Int. Rate< 6%?   0.8533

Stock Performance Tests:
Volatility > 25%?          1.1315       % Held by Insiders  < 5%?  2.4038
Beta > 1.25?               0.5680       % Held by Institut. < 50?  0.7184
50 Da MA > 200 Da MA?      0.2133       % Held by Institut. > 30?  2.3200
52-Wk Change vs. S&P 500: -0.1667       Short Ratio > 5?           0.7800
Price/Book Value < 3?      2.7000       Short % of Float > 20?     0.2200
Return on Assets > 17%?    0.4329       Average Volume > 100,000?  3.0000

Cash Flow Tests:
Oper. C.F. > Lever'd C.F:  3.0000       Positive Free Cash Flow?   1.0000
Positive Oper. Cash Flow?  1.0000       Price to C.F./sh. Ratio:   1.9081
                                        Cash Flow / Assets >.10?   0.2546

TSN     Tyson Foods Inc.                Overall Zenith Index:      1.4734


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The summary below includes a value for `Degree,' which refers on a
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for the last closing price to be within the channel, otherwise zeroed.
The `Index' is the `Degree' weighted for volatility.  Generally, the
the higher the index, the more suitable is the stock for trading as
a `rolling stock' between channel high and low points.

Results for Tyson Foods Inc.:
Symbol? TSN
Total Months Available:  48
       Months in Cycle?   4

Months Covered by Periods:  12

Period 1           Period 2          Period 3
   H1      L1        H2      L2        H3      L3
  19.99   16.17     20.12   15.60     20.74   15.96

RANGE   =  20.74  TO   15.60            Close =  19.93
CHANNEL =  19.99  TO   16.17           Degree =   7
Volatility =  19.17%                    Index =  13
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Neural Network Prediction

"Neurostock" can only track long trades. Therefore its performance, as tracked by itself on stocks which are consistently falling, may not appear as good as it could if each "sell" signal were a "short sale."

Neural Chart Heading
Neural Trades Neural Prediction



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Ultimate Trading Systems

The corresponding trades for the above chart are shown in tabular form below.



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Recommendation

Decision Weighting Factors
FactorsWeighted Points
News - 1
Comparison - 1
Industry - 1
Bond Issue 0
Zenith Index + 1
Non-GAAP vs. GAAP Earnings < 1%+ 1
Cash Flow - 1
Ratios + 1
Market Grader + 1
Intrinsic Value DCF + 1
Intrinsic Value DDM + 1
Stock Scout + 1
Projected Earnings + 1
Research Reports + 1
Analysts + 1
Executive Perquisites - 1
Insider Activity - 1
Institutional Activity - 1
Management Reporting + 1
Short Interest + 1
Sentiment + 1
Standard & Poor's - 1
Moving Average - 1
Right Time Study + 1
Stock Fetcher - 1
Point & Figure + 1
Wall Street Analyzer + 1
Marketspace Chart + 1
Time Series Chart + 1
Neural Network - 1
Stock Options + 1
Ultimate Trading Systems - 1
Total + 7
Place 1,460 shares of Tyson Foods, Inc. (TSN) on the Active List.