Please ensure Javascript is enabled for purposes of website accessibility

Why Tyson Foods Stock Jumped 10.4% in December

By Beth McKenna – Jan 5, 2022 at 10:14AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In 2021, shares of the meat processing giant partly bounced back from their pandemic-driven poor performance in 2020.

What happened

Shares of meat processing giant Tyson Foods (TSN 0.02%) jumped 10.4% in December, according to data from S&P Global Market Intelligence. By comparison, the S&P 500 index returned 4.5% last month. 

The stock's December gain can probably be largely attributed to the upward momentum it enjoyed throughout 2021 and investors' rotation into stocks they believe are better bets in the current economic environment.

For the bigger-picture context, in 2021, Tyson stock returned 38.5%, compared to the S&P 500's 28.7% return. However, last year's outsize gain was just a partial bounce back from 2020, a year in which meat processing stocks were hit hard by the fallout from the early stages of the pandemic. In that year, shares of Tyson plunged nearly 30%, while the broader market returned more than 18%. For the period from Jan. 1, 2020, through Jan. 4, 2022, Tyson stock returned 3.4%, significantly trailing the broader market's 53.3% return.

A few employees working on a chicken processing line.

Image source: Getty Images.

So what

Tyson's earnings for each of the quarters it reported in 2021 beat Wall Street's estimates. For the fourth quarter of fiscal 2021, revenue rose 12% year over year to $12.8 billion, driven by a 17% jump in beef sales. Adjusted for one-time items, earnings per share (EPS) surged 35% to $2.30, exceeding the analyst consensus estimate of $2.03.

Moreover, last year, the company's pandemic-driven struggles eased compared to 2020. So it's not surprising Tyson stock enjoyed solid momentum throughout 2021, including in December.

The stock also probably got a boost in December from investors rotating into stocks they believe will hold up better in an inflationary environment with interest rate hikes on the near-term horizon. 

Now what

Tyson hasn't yet announced a date for the release of its results for the first quarter of fiscal 2022, but it will probably be about mid-February.

For the fiscal first quarter, Wall Street is modeling for revenue to grow 15% year over year to $12.1 billion and adjusted EPS to edge down 4% to $1.86.

Consumers are fickle, which is one main reason food and apparel stocks are among two of my least favorite stock groups. Sure, there are a few attractive stocks in these groups, such as Domino's Pizza and Lululemon Athletica. But for long-term investors who are buying shares of well-established large food companies (such as Tyson) for their relative stability and dividend, I'd suggest that select utilities stocks are often the better way to go.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns and recommends Domino's Pizza and Lululemon Athletica. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.