BMO Reaffirms Tyson Foods As 'Top Pick' For 2019

Tyson Foods, Inc. TSN held its annual day presentation Thursday, which prompted BMO to reaffirm the food company as a "top pick" for 2019.

The Analyst

BMO Capital Markets' Kenneth Zaslow maintains an Outperform rating on Tyson Foods with a $90 price target.

The Thesis

Tyson Foods' presentation was well received and reaffirms the view that the company will exceed expectations of $6.50 in EPS in fiscal 2020 and $2 billion in free cash flow, Zaslow wrote in a note. The company should outperform as it continues to emphasize value-added products in the prepared category through its brand power, market share, and strong protein supply chain. The focus on prepared foods should also help mitigate volatility in the commodity business.

Management is also expected to take advantage of the growth in alternative meat products to address 75% of the market who are looking at or have already added plant-based food items to their diet, the analyst wrote. While Tyson may be a bit late to enter the market it should be able to "catch up fairly quickly" by taking advantage of its distribution network.

Finally, food safety issues like the African Swine Flu should help create earnings upside for Tyson Foods, especially in its international business. American-based business like Tyson is likely to fill the void to address global shortages of Chinese pork supplies and this could prove to be a multi-year long trend.

Price Action

Shares of Tyson Foods were traded higher by 1% to $79.46 Friday afternoon.

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