Articles in this document:

· Tyson Foods(TSN): Shares Starting to Look Tasty

· Tyson Foods Still Struggling with Agflation

Tyson Foods(TSN): Shares Starting to Look Tasty

By: Ockham Research Tuesday, July 29, 2008 8:52 AM

iStockAnalyst

Tyson Foods (TSN) posted third quarter profit well below analyst estimates and the stock is taking a six percent haircut in Monday’s trading. The Arkansas-based meat processor was expected to earn 12 cents per share on revenue of $7 billion. The company reported earnings this morning before the open that were well below that number, coming in at only three cents per share on $6.8 billion in revenue. The company earned only $9 million dollars compared to the same quarter last year when earnings were $111 million. Skyrocketing grain costs in the company’s chicken segment were largely to blame for the tough quarter and the company expects this situation to continue for the remainder of the year, despite its belief that the nation’s corn yield will surpass government estimates, thus somewhat reducing pricing pressures on this critical commodity.

TSN shares are beginning to be quite attractive to Ockham, especially after today’s sell-off. The company is in a segment (consumer staples) that still remains pricey according to our valuation measures and therefore, we are not as eager to purchase the shares at the current time. However, continued weakness in both the consumer staples segment and TSN would make us much more bullish on the stock.

Tyson CEO Richard L. Bond believes that it will take another quarter before the company is able to overcome the tough current operating environment. However, he expects fiscal 2009 to see a strong rebound. Many customer contracts will be renegotiated next year and those customers are getting very favorable prices that did not anticipate the strong grain inflation seen this year. Tyson will pass these higher costs onto its customers in the new contracts.

TSN’s beef, pork and prepared foods segments offset the $44 million loss in the chicken business, however, these units also suffered from the higher costs of wheat, dairy and cooking ingredients.

Ockham normally looks for undervalued opportunities in oversold markets and or market segments when recommending a particular stock. As such, Tyson Foods is beginning to get to a price level that we would find appealing. A continued general market sell-off or correction relative to other market segments which brought the consumer staples segment to a lower level comparatively would give us the opportunity to add TSN to our “Strong Buy” list.

istockanalyst.com

Tyson Foods Still Struggling with Agflation

by: Trader Mark posted on: July 28, 2008 | about stocks: COW / TSN

SeekingAlpha

I continue to believe food inflation (agflation) will replace energy inflation as the "beef" (pardon the pun) of choice in 2nd half of 2008, mostly due to the delayed effects of high input costs making their way through the "food" (sorry) chain. We've been on this beat very early [Aug 29, 2007: Inflation in Groceries - Fed Between a Rock and a Hard Place] [Sep 5: Tyson Food Warns] [Nov 12: Tyson Foods Continues to Point to Food Inflation] but unfortunately we really have not benefited financially in this part of the investing spectrum - iPath DJ Livestock ETN (COW) has been listless at best, and the grain ETFs available to US investors are combinations of multiple commodities, some of which are going down while others go up - hence cancelling each other out sometimes. Corn has fallen quite precipitously along with crude oil (since it's all the same to speculators), and much better weather the past month in the US Midwest. This might bring some relief for this year's crops but again the world food production system has low stockpiles across the board, and we remain in constant perilous condition and having to hope for good weather.

Tyson Foods (TSN) out with another bad earnings report - to offset higher inputs they will have to raise prices as we've long predicted.

· Tyson Foods Inc., the world's largest meat company, said that third-quarter profit plunged 90 percent on the rising cost of grain to feed chicken and that it may take until next year to turn the trend around.

· The company earned $9 million, or 3 cents per share, compared with $111 million, or 31 cents per share, in the year-earlier period. Revenue rose to $6.8 billion from $6.6 billion.

· A survey by Thomson Financial, which generally excludes items, showed analysts expected Tyson to earn 12 cents per share on revenue of $6.99 billion in the period ended June 30.

· Tyson expects overall costs to increase an estimated $1 billion this year because of the skyrocketing costs of grain and other staples. Grain costs with which to feed chickens rose $140 million in the quarter, and are expected to jump $550 million for the whole of 2008, the company said. (no inflation in the US, move along - nothing to see here)

· Tyson has had problems raising its prices fast enough to cover the jump in feed grain expenses, but the company said it will continue to hike prices "over the next several quarters."

I continue to furrow through companies reports to find "real inflation" versus the fiction reported monthly by the government reports.

P.S. Notice the folly of simplistic logic in the chart below over the past few weeks - wow, when crude drops $20 and gas drops 25 cents it's time to buy companies that have been hurt by inflation since everything will be "fine". Not so much.

Disclosure: Long iPath DJ Livestock ETN in fund; no personal position

seekingalpha.com