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Why Tyson Foods, Inc. Stock Jumped 31.4% in 2017

By Steve Symington – Jan 11, 2018 at 9:00AM

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The food industry giant just finished a banner year. Here's what investors need to know.

What happened

Shares of Tyson Foods Inc. (TSN 0.58%) climbed 31.4% in 2017, according to data from S&P Global Market Intelligence, as the market reacted to a promising acquisition and a pair of encouraging quarterly updates late in the year. 

Tyson Foods stock traded sideways from the start of last year through early August, then began its ascent in earnest with a nearly 6% single-day pop on Aug. 7, 2017 following the company's strong third-quarter report. In that report, Tyson Foods not only delivered volume growth in every segment led by beef and pork, but also predicted it would be able to achieve annualized net synergies of more than $200 million related to its recent $4.2 billion acquisition of value-added proteins and sandwich company AdvancePierre.

Tyson Foods semi truck with logo and beef dinner product on the side of the tractor trailer


So what

Tyson Foods continued to climb for the duration of the year, including a more than 11% jump in the month of September after management announced that -- thanks to the outperformance of Tyson's Beef segment -- they were increasing their full fiscal-year guidance to call for adjusted earnings in the range of $5.20 to $5.30.

At the same time, Tyson announced layoffs of 450 employees primarily across its corporate offices -- a "hard" decision, according to Tyson Foods CEO Tom Hayes, but one the company made with the goal of becoming a "more agile and responsive organization" to the benefit of both its customers and consumers.

If that weren't enough, Tyson predicted that -- through a new restructuring program -- it would be able to generate cumulative cost savings of $200 million in fiscal 2018, $400 million by fiscal 2019, and $600 million by fiscal 2020, primarily derived from its prepared foods and chicken segments.

Now what

Finally, with its most recent quarterly report in mid-November, Tyson Foods capped the year with adjusted earnings of $5.31 per share -- above the high end of its previously raised guidance -- and reiterated its multiyear cost-savings goals. 

As it stands, investors will receive their next update on Tyson's progress in early February, when the company releases first-quarter 2018 results and holds its annual shareholder meeting. In the meantime, given Tyson's habit of underpromising, overdelivering, and making its business ever more efficient through cost-savings initiatives, it's no surprise to see the stock trading at a fresh all-time high as of this writing.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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