Rising stock prices show that Tyson Foods had a solid fiscal year, and its reshaped image and leadership adjustments since its 2014 acquisition of Hillshire Brands Hillshire merger have helped the company keep its spot as one of the nation's dominant food companies -- with room to grow.
Tyson Foods has managed to keep investors happy while steering into more diversified territory.
Under the leadership of Tom Hayes, who finished his first year as company president and chief executive officer, Tyson has embraced the idea of becoming a "protein" producer and not just a meat company. Increased transparency, technology and sustainability at Tyson Foods have been key initiatives for Hayes, who in 2017 promised increased wages, third-party audits and better treatment of its animals.
Tyson's stock, in effect, has risen about 30 percent on a year-to-date basis as of Tuesday.
"I'm extremely pleased we delivered another record year, but even more excited about the future of Tyson Foods," Hayes said during a fourth-quarter earnings call. "We are in the early stages of a transformation to become a more modern food company."
Before the acquisition of Hillshire, Tyson Foods was slowly shifting its image away from the nation's leading chicken company by purchasing U.S. beef and pork operations. By 2014, the company famous for Jimmy Dean and Ball Park Franks had merged with the Springdale-based Tyson Foods to become the protein-packer it is today.
Tyson was larger than Hillshire before the acquisition, but "I keep seeing Tyson becoming more Hillshire-oriented over time," said Alan Ellstrand, associate dean of the Sam M. Walton College of Business at the University of Arkansas, Fayetteville.
"In some ways you could argue it's hard to know who acquired who?"
Hayes, formerly of Hillshire, consolidated his leadership team twice this year to streamline operations, appointing six executives to new positions that would report directly to him. Two of them previously worked for Hillshire. As leadership consolidated, 450 employees were terminated shortly after the close of Tyson's fiscal 2017 in September, which affected corporate teams in Springdale, Cincinnati and Chicago, according to Tyson.
"There've been lots of layoffs and reorganizations that clearly affects [Tyson's] culture," said Ellstrand, who specializes in corporate strategy.
In late 2016, Tyson data showed Tyson had the largest share of U.S. chicken production (21 percent), along with 24 percent of the domestic beef market and 18 percent of the nation's pork market.
Because of ample cattle and hog supplies paired with strong meat demand, Tyson's earnings are projected to grow 7 percent to 10 percent, according to its latest earnings report.
Tyson's earnings per share for each fiscal 2017 quarter "alone would confirm it delivered," said Ken Shea, Bloomberg senior food and beverage analyst.
Last year, Tyson beat Bloomberg's estimates by 25 percent for the first quarter, 3 percent for the third quarter and 5 percent for the fourth quarter.
However, Tyson missed analysts' second-quarter earnings-per-share estimates by 1 percent, citing two plant fires̶a̶n̶d̶ ̶a̶ ̶$̶5̶3̶ ̶m̶i̶l̶l̶i̶o̶n̶ ̶f̶i̶n̶e̶ ̶a̶f̶t̶e̶r̶ ̶a̶ ̶p̶r̶i̶c̶e̶-̶f̶i̶x̶i̶n̶g̶ ̶S̶e̶c̶u̶r̶i̶t̶i̶e̶s̶ ̶a̶n̶d̶ ̶E̶x̶c̶h̶a̶n̶g̶e̶ ̶C̶o̶m̶m̶i̶s̶s̶i̶o̶n̶ ̶i̶n̶v̶e̶s̶t̶i̶g̶a̶t̶i̶o̶n̶ ̶s̶u̶r̶r̶o̶u̶n̶d̶i̶n̶g̶ ̶t̶h̶e̶ ̶G̶e̶o̶r̶g̶i̶a̶ ̶D̶o̶c̶k̶,̶ ̶o̶n̶e̶ ̶o̶f̶ ̶t̶h̶e̶ ̶n̶a̶t̶i̶o̶n̶'̶s̶ ̶l̶e̶a̶d̶i̶n̶g̶ ̶c̶h̶i̶c̶k̶e̶n̶ ̶p̶r̶i̶c̶e̶ ̶i̶n̶d̶e̶x̶e̶s̶.̶*
After investigations, Tyson Foods received a letter in August from the Securities and Exchange Commission, saying it wouldn't recommend further action against the company.
While Hayes' appointment was pivotal for the company's outlook, "I think Donnie Smith deserves a lot of credit" for taking the reins at an unstable time and setting the course Tyson's currently on, Shea said. A course that includes investments in plant-based protein, financial fitness plans and annual sustainability reports.
After a mass fish kill in May 2015 in waterways near a Tyson plant in Monett, Mo., the company paid a $2 million fine to the federal government, and a half-million dollars to state and city organizations. The Springdale company also said it would fund third-party audits of its feed mills and wastewater treatment plants to prevent similar incidents from happening again.
In 2017, Tyson further proved it's a company that can successfully acquire and implement businesses, Shea said.
"With Hillshire it was a home run, and AdvancePierre has early signs of that also," he said.
The company finalized its purchases of sandwich maker AdvancePierre in May and its acquisition of sliced beef producer Philly Original Holdings in November.
"Tyson delivered above average sales growth, never compromised, kept its balance sheet strong, and this positions them well to make acquisitions as they come along," Shea said.
Shortly after purchasing AdvancePierre, Tyson Foods announced plans to sell some non-protein assets near the end of 2017, but news on when, who to and which ones is pending with the company.
"Looking ahead into 2018 and beyond, you'd expect Tyson to aggressively pursue the trajectory it cemented in 2017," Martin Thoma, principal of Thoma Thoma, said in an email.
Instead of leaning into commodity products like fresh chicken, Tyson developed value-added products such as Jimmy Dean Simple Scrambles (microwaveable eggs in a cup), Tyson Tastemakers (the company's meal-kit equivalent) and Hillshire Snacking (meat and cheese pairings).
"It's working; it's where the margins are," Thoma said. "In the next few years the company's going to look more and more like a Nestle, a Kraft Foods, a Unilever or Mondelez ... a big, diverse, integrated food manufacturing and marketing company versus the animal-agriculture organization it grew up as."
Business on 01/03/2018
*CORRECTION: Tyson Foods Inc. has not been fined by the Securities and Exchange Commission in a price-fixing investigation involving the Georgia Dock, one of the nation’s leading chicken price indexes. A previous version of this story incorrectly reported that Tyson Foods paid a fine.