Can Tyson Earnings Keep Flying Higher?

Tyson Foods (NYSE: TSN  ) will release its quarterly report next Monday, and with the industry getting a lot of attention due to the high-profile acquisition of one of Tyson's competitors, investors have gotten a lot more excited about Tyson's prospects as well. But can Tyson earnings deliver the growth that shareholders want to see?

Tyson produces a wide variety of meat products, including chicken, beef, and prepared foods. But lately, it's been the company's pork unit that has drawn the most attention, because of the impending buyout of Smithfield Foods (UNKNOWN: SFD.DL2  ) . Does Tyson deserve the same premium that Smithfield was able to fetch in its acquisition? Let's take an early look at what's been happening with Tyson Foods over the past quarter and what we're likely to see in its quarterly report.

Stats on Tyson Foods

Analyst EPS Estimate

$0.59

Change From Year-Ago EPS

18%

Revenue Estimate

$8.66 billion

Change From Year-Ago Revenue

4.2%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

How will Tyson earnings fare this quarter?
In recent months, analysts have boosted their views on Tyson earnings, kicking up their June-quarter estimates by a nickel per share and their full-year fiscal 2014 consensus by almost three times that figure. The stock has also headed to new all-time highs, with gains of more than 15% just since the end of April.

Tyson has been squarely in the shadow of Smithfield Foods ever since Smithfield got a buyout bid from Chinese meat processing giant Shuanghui. Although pork consumption in the U.S. hasn't changed much in recent decades, Chinese consumers have demanded increasing amounts of meat as their overall standard of living has risen, and pork remains extremely popular there, making up about half of the world's total consumption. Tyson has the second-largest market share of U.S. pork production at 17% compared to Smithfield's 28%, and it has enjoyed strong margins from its pork-processing division lately. But Tyson has to worry that Smithfield will get a pseudo-home-field advantage among Chinese consumers once it's a Shuanghui subsidiary.

Also, Tyson has to overcome concerns about food-industry practices and safety and health risks. An avian flu outbreak in China has hurt chicken sales in the emerging market, affecting not only fast-food outlets selling chicken there but also chicken producers like Tyson and Sanderson Farms (NASDAQ: SAFM  ) . With ongoing regulatory challenges, Tyson has to make sure it keeps customers happy and secure in their beliefs that their food products are safe.

Tyson hasn't gotten any buyout offers of its own, but it did make a modest acquisition of California's Circle Foods in June. The move gives Tyson access to Circle's Nuevo Grille and Tortillaland Mexican-food products and its Rotiland Indian flatbread offering, as well as a private-label business and a San Diego-based production facility. Such moves don't make a massive difference to Tyson, but they nevertheless help the company boost growth incrementally.

In the Tyson earnings report, look to see how the company expects to handle competing with Smithfield after the Shuanghui acquisition. Only by recognizing the new competitive threat to its Chinese business will Tyson be able to maintain its success and keep growing at an attractive pace.

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