Understanding Tyson Foods’ Newly Added Risk Factors

Arkansas-based Tyson Foods (TSN) is a multinational food company that supplies beef, pork and chicken products. The company recently sold its pet treats business for $1.2 billion and has detailed a plan to save $1 billion in annual productivity costs by the end of 2024.

With this in mind, let us take a look at the company’s financials and understand its newly added risk factors. (See Top Smart Score Stocks on TipRanks)

Q4 Financial Results

Tyson Foods’ revenue of $12.8 billion in the fourth quarter of 2021 exceeded the consensus estimate of $12.7 billion. The company had reported revenue of $11.5 billion in the same quarter last year.

TSN posted adjusted EPS of $2.30 during the quarter, beating the consensus estimate of $2.03 per share. The company had posted earnings of $1.70 per share in the same quarter last year.

Tyson Foods ended the fourth quarter with $4.8 billion of liquidity. It plans to distribute a quarterly cash dividend of $0.414 per share on December 15. It will make the payout to shareholders on record on December 1. (See Tyson Foods stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, TSN’s main risk categories are Production, Finance & Corporate and Macro & Political, which account for 23%, 19% and 19%, respectively, of the total 31 risks identified for the stock. The company has recently added two new risks to its profile.

TSN cautions investors that climate change-related issues may have a long-term adverse effect on its business. It mentions that the available quantities of raw materials may be insufficient and costs of the materials may increase as a result of changes in weather patterns decreasing agricultural productivity. It adds that extreme weather conditions may disrupt its supply chain and adversely impact the demand for its products. Additionally, the company notes that tighter climate change regulations could increase its costs.

Tyson Foods tells investors that some of its production facilities have experienced labor challenges due to the COVID-19 pandemic. It cautions that the labor challenges could make it difficult to run facilities at full capacity. The company adds that its labor expenses may increase as it tries to boost wages to attract and retain workers or increase overtime to meet demand. All these could have a negative impact on the company’s business and financial condition.

The Production risk factor’s sector average is at 17%, compared to TSN’s 23%. Shares of the company have gained about 30% year-to-date.

Analysts’ Take

Following Tyson’s fourth quarter earnings report, BMO Capital analyst Kenneth Zaslow maintained a Buy rating on Tyson and raised the price target to $103 from $95. Zaslow’s new price target suggests 23.24% upside potential.

Consensus among analysts is a Moderate Buy based on 2 Buys and 4 Holds. The average Tyson Foods price target of $90.17 implies 7.88% upside potential to current levels.

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