Capacity Expansions Aid Tyson Foods (TSN) Amid Rising Costs


Zacks Equity Research

September 14, 2022


Focus on capacity-expansion endeavors is favoring Tyson Foods, Inc.. The well-known leader in protein is well placed to capitalize on the rising demand for protein-packed brands. That said, Tyson Foods is not immune to rising costs and supply chain headwinds.


Let’s delve deeper.


Expansion Efforts Solid


Tyson Foods is undertaking several operational and supply chain efficiency programs to position itself better in the long run. The company continues accelerating digitalization via supply chain planning and execution processes to enhance customer service. Management is optimizing its plant network by adding fully cooked capacity, converting plants for value-added production, executing plant flexibility and enhancing portfolio mix. In its last earnings call, management highlighted investing in new plants and expanding existing capacity across its global network.


The company has eight plants under construction, with two envisioned to start operation during fiscal 2022, while the other six would start by the end of fiscal 2023. The incremental capacity will help the company counter capacity constraints, accelerate value-added growth and meet the rising consumer demand for protein. Management expects to invest nearly $1.9 billion in fiscal 2022, focused mainly on new capacity and automation objectives. Tyson Foods is focused on efforts to expand into international markets as part of its strategic growth plan.


Strength in Protein-Packed Brands


The Zacks Rank #3 (Hold) company focuses on higher protein production to cater to the rising demand for protein-packed food. It boasts a rich portfolio of protein-packed brands that are growing rapidly across the globe. The company has undertaken divesture of non-protein businesses to focus on the growing protein-packed food arena. TSN has been steadily expanding its fresh prepared foods offering, owing to consumers’ rising demand for natural fresh meat offerings without any added hormones or antibiotics.


Considering its strong year-to-date results, management continues to expect fiscal 2022 sales in the $52-$54 billion range. For the Beef segment, the United States Department of Agriculture (“USDA”) projects domestic production to grow nearly 1% year over year in fiscal 2022. Per USDA forecasts, production in the Chicken segment will likely improve by almost 1% in fiscal 2022. For fiscal 2022, USDA projects domestic protein production (beef, pork, chicken and turkey) to be relatively in line with fiscal 2021 levels.


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