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Tyson Foods, Inc. TSN is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 17.51, higher than the industry average of 16.08. This premium valuation reflects the market's confidence in the company's potential to deliver strong profit growth. However, it remains to be seen if the company can report results that justify such a premium.

Shares of Tyson Foods have lagged in recent months, with a modest gain of 0.4% over the past three months, compared to the industry’s growth of 1.2% and the S&P 500’s increase of 6.4%. While a high valuation and the stock's recent underperformance suggest caution, the company's key growth strategies may appeal to investors.

Current Challenges for Tyson Foods

Tyson Foods, like many other global companies, faces ongoing macroeconomic uncertainties that could impact demand for protein products. Volatile currency movements, fluctuating commodity prices and potential slowdowns in consumer spending pose risks to both international and domestic operations.

The company has been grappling with challenges in its Beef segment, with profitability heavily impacted by compressed spreads and tight cattle supplies. For fiscal 2025, the United States Department of Agriculture (“USDA”) projects domestic protein production for beef to decline nearly 2% year over year. Tyson Foods expects a loss between $400 million and $200 million for the Beef segment in the fiscal, mirroring fiscal 2024 results.

In the fourth quarter of fiscal 2024, profitability in the Beef segment remained constrained despite a 4.6% revenue increase. While Tyson Foods has implemented operational efficiencies, such as reducing costs and improving yields, approximately 85% of the segment's performance remains dictated by uncontrollable market dynamics, including cattle availability and pricing volatility. These persistent headwinds signal continued difficulty in achieving a meaningful recovery in the Beef segment.

Tyson Foods' Pork segment also faces challenges stemming from pricing pressures and a constrained market environment. The segment saw a 3.7% decline in revenues during the fourth quarter, attributed to lower pricing on dropped credit items. While Tyson Foods has made strides in optimizing its pork network and expanding its portfolio with seasoned and marinated products, the broader market conditions and pricing constraints could negate these operational gains, potentially stalling momentum in this segment.

Despite delivering an adjusted operating income (AOI) increase of $270 million year over year in fiscal 2024, driven by improved operational execution and healthier herd dynamics, the company anticipates flat profitability for fiscal 2025, with AOI projected between $100 million and $200 million. This limited upside reflects the risk of tightening spreads and challenges in maintaining margins in a competitive protein market.

TSN’s Growth Strategy on Track

Tyson Foods’ diversified protein portfolio enables the company to navigate market cycles effectively. While beef and pork face near-term challenges, the strong performance of chicken and prepared foods underscores the resilience of the company’s multi-protein approach. The company also plans to expand its international footprint by improving capacity utilization and aligning operations with regional market needs, diversifying its growth avenues. Tyson Foods’ multi-channel, multi-protein strategy is central to its long-term resilience and growth, allowing it to capitalize on different market opportunities as they arise.

Tyson Foods' growth strategy is anchored in three key pillars: operational excellence, customer and consumer obsession and sustainability. Operational excellence is achieved through continuous improvement initiatives that enhance productivity and efficiency across all segments, supported by a robust supply-chain optimization strategy. The second pillar, customer and consumer obsession, drives Tyson Foods’ commitment to understanding and responding to evolving consumer preferences.

Tyson Foods’ focus on sustainability underscores its commitment to ethical sourcing and responsible production practices, addressing the increasing consumer demand for sustainable food options. Together, these pillars position Tyson Foods for continued growth and resilience in the competitive protein market.

Tyson Foods exhibited a significant turnaround in fiscal 2024, with adjusted operating income (AOI) of $1.8 billion, nearly doubling from fiscal 2023. In the fourth quarter of fiscal 2024, the company’s AOI soared considerably to $512 million from the $236 million reported in the year-ago period. The adjusted earnings per share (EPS) increased from 37 cents to 92 cents in the quarter, marking the strongest quarterly performance in eight quarters. Improved operational efficiency and disciplined cost management led to the upside, keeping the company well-positioned for the future.

What to Expect From TSN?

Tyson Foods’ fiscal 2025 guidance anticipates flat to slightly declining net sales, with volume growth in prepared foods and chicken likely to be offset by declines in beef and pork. Beef volumes are particularly vulnerable to supply constraints, and pork could face challenges from tighter spreads despite operational improvements. This stagnant volume growth outlook may deter investor confidence in the company’s ability to drive top-line expansion.

However, the fiscal 2025 AOI is envisioned in the $1.8-$2.2 billion band, suggesting nearly 10% growth at the midpoint, driven by strength in prepared foods and chicken. This optimistic outlook is further reinforced by operational excellence, strategic brand focus and robust free cash flow generation.

Reflecting the positive sentiment around Tyson Foods, analysts have revised their estimates upward. The Zacks Consensus Estimate for the current and next fiscal year earnings per share have increased in the past seven days. These estimates suggest year-over-year growth rates of 12.9% and 22.8%, respectively.

Investors’ Guide to TSN Stock

Tyson Foods’ strong profit growth potential, driven by its diversified protein portfolio and strategic initiatives, looks somewhat shadowed by challenges in key segments like Beef and Pork. While operational efficiencies and sustainability efforts bolster TSN’s long-term growth prospects, near-term headwinds need attention. Investors will need to weigh Tyson Foods' robust strategic framework and operational improvements against ongoing market uncertainties to determine whether its premium valuation is justified. The company currently carries a Zacks Rank #3 (Hold).

Top Three Consumer Staple Picks

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.5% from the year-ago reported number.

Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates growth of 27.3% and 224.3%, respectively, from the prior-year reported levels.

McCormick & Company MKC, which manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.

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Corteva, Inc. CTVA has been making strategic moves to boost overall growth. The company has been focused on maximizing its shareholders’ value. In its latest announcement, CTVA highlighted its strategy of delivering value to shareholders by addressing the global headwinds such as food security; climate change, and its intensifying weather and pressures from insects, weeds and diseases; and the energy transition from fossil fuels, which is leading to higher demand for biofuels. Corteva looks to address these issues through innovation.

The company’s board has approved a new $3-billion share repurchase authorization, which is effective immediately and does not expire.

More on CTVA’s Latest Announcement

Corteva outlined a new financial framework through 2027: $1 billion in higher net sales from growth platforms, ~$1 billion in cost deflation and productivity gains and nearly $4.5 billion in shareholder returns.

CTVA’s six growth platforms, which are core to the aforesaid framework, have been further defined. The first platform is seed and trait out-licensing to reinforce Corteva’s target to be royalty-neutral by the end of 2028; the second is biologicals to target $1 billion in annual revenues by a decade’s end and boost yields; and the third is new crop protection technologies to keep up with the increasing pressures of insects, weeds and diseases.

The fourth platform is gene editing to take advantage of the highly-advanced capacity in the industry, with major germplasm to change the way the world farms; the fifth is biofuels to cater to increasing fuel demand from the long-haul transportation sector with low-carbon alternatives; and the sixth platform is hybrid wheat, proprietary system with a potential to generate yield advantages of up to 20% in a water-stressed landscape.

Such strategic platforms demonstrate the company’s commitment to constant innovations, along with cost and operational effectiveness. It reinvests 8% of its sales into research and development, which is the equivalent of nearly $4 million per day, to resolve farmers’ most intractable problems.

Details on CTVA’s Share Repurchase Plan

The company’s newly authorized program is in addition to its current $2-billion program, which was declared in September 2022. The existing program had nearly $750 million available as of Sept. 30, 2024.

CTVA’s common stock might be repurchased periodically in open-market or private transactions. The actual timing, number and value of shares to be repurchased under its share repurchase program will depend on several factors like market price of its common stock, general market and economic conditions, suitable legal requirements, and other business considerations and capital uses such as organic growth, dividends and acquisitions.

During the nine months ended Sept. 30, 2024, Corteva bought back $757 million and paid dividends of $340 million. Management anticipates repurchasing roughly $ 1 billion shares in 2024, while cash provided by operating activities from continuing operations is likely to be in the band of $2.1-$2.6 billion. Free cash flow is predicted to be between $1.5 billion and $2 billion.

Earlier, this year the company hiked its dividend as well. Such shareholder-friendly actions, coupled with the latest share repurchase authorization, highlights Corteva’s commitment to boosting its shareholders’ value.

What’s More to Know About CTVA?

Corteva’s shares have gained 22.6% year to date, outperforming the industry’s 10.4% decline.

The company’s strategic initiatives are on track. CTVA’s Crop Protection business has been performing well, buoyed by solid demand for its unique technology and gains from deflation. Corteva looks forward to delivering savings of more than $400 million in 2024.

Recently, the company unveiled a revolutionary breakthrough in wheat, which is a first-of-its-kind, proprietary non-GMO hybrid technology. CTVA’s breakthrough hybrid wheat technology looks to grow yield potentially by 10% with the same amount of land and resources; and more resistant to drought. The company currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings per share (EPS) indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

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Shares of Monster Beverage Corporation MNST have shown strength in the past three months. The stock has gained 14.3% against the industry’s 8% decline in the same time frame.

The company has been benefiting from the expansion of its energy drinks category and product launches. It has launched various products and expanded distribution across the international markets.

Let us delve deeper.

Analyzing Monster Beverage’s Strengths

Monster Beverage has been driving performance for a while now. In third-quarter 2024, the Monster Energy Drinks segment's net sales grew 0.8% year over year to $1.72 billion. On a currency-adjusted basis, sales for the segment rose 3.9%.

The company offers a wide range of energy drink brands such as Monster Energy, Monster Energy Ultra, Monster Rehab, Monster Energy Nitro, Java Monster, Punch Monster, Juice Monster, Monster Hydro Energy Water, Monster Hydro Super Sport, Monster Super Fuel, Monster Dragon Tea, Reign Total Body Fuel, Reign Inferno Thermogenic Fuel, Reign Storm, True North, NOS, Full Throttle, Burn, Mother, Nalu, Ultra Energy, Play Relentless, BPM, BU, Gladiator, Samurai, Live+, Predator and Fury.

Product innovation plays a significant role in the company's success as well. During the third quarter of 2024, the company launched Monster Ultra Violet in Australia. It launched Monster Reserve, Orange Dreamsicle, Juiced Aussie Lemonade, Juiced Bad Apple, Juiced Mango Loco, Ultra Black, UltraGolden Pineapple, Ultra Peachy Keen, Ultra Rosa, Ultra Strawberry Dreams and UltraWhitein several countries of EMEA. Further launches are planned within all brands throughout EMEA this year.

MNST also launched Papillon in a 500-ml aluminium bottle in Japan and Ultra Peachy Keen in Singapore. The company intends to launch Predator in various additional provinces in 2025. In India, Monster Beverage extended the Predator Gold Strike carbonated 250 ml PET bottle beyond the Delhi region to the Northeast states this July and Madhya Pradesh this September. Management is optimistic about the long-term prospects for the Monster label in China and India, and about the expansion of Predator in these countries.

In addition, the company continues to benefit from its pricing actions across various regions to negate the impacts of rising commodity costs and inflation. Management has been reviewing opportunities for price increases internationally. The company has been making a roughly 5% price increase on its core brands and packages, effective Nov. 1, 2024, in the United States. These have been aiding its gross margin for a while. Gross margin expanded 200 basis points (bps) year over year to 53.2% in the most recent quarter.

High Costs: A Major Concern for MNST

On the flip side, Monster Beverage has been witnessing higher costs for a while now. In third-quarter 2024, operating expenses grew 9.9% year over year due to elevated costs associated with sponsorships and endorsements, increased payroll expenses and expenses related to intellectual property claims. As a percentage of sales, operating expenses expanded 210 bps to 27.6%. Also, selling expenses, as a percentage of net sales, increased 90 bps year over year to 10.4%.

Further, general and administrative expenses, as a percentage of net sales, jumped 150 bps year over year to 12.8%. These expenses may continue to weigh on the company’s overall profitability. Its earnings lagged the Zacks Consensus Estimate and fell year over year during the last reported quarter.

In addition, management highlighted that the energy drink category in the United States witnessed lower growth rates, in the convenience channel, during the last reported quarter. A tighter consumer spending landscape for some income groups and weak demand also remain concerning. Adverse foreign currency exchange rates continued to act as deterrents.

MNST Stock Valuation

Monster Beverage’s stock is trading at a premium valuation relative to the industry. Going by the price/earnings ratio, the stock currently trades at 29.41 on a forward 12-month basis, higher than 19.52 of the industry. Also, the stock is trading higher than its five-year median of 28.89.

Final Words on MNST Stock

The company's pricey valuation and the aforesaid headwinds signal a cautious approach for investors willing to enter at this level. For existing investors, holding onto the stock seems to be a prudent choice, considering the company’s long-term growth potential and robust strategies.

In addition, analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share is currently pegged at $7.48 billion and $1.62, respectively. These estimates show corresponding growth of 4.7% and 4.5% year over year. The stock’s Zacks Rank #3 (Hold) supports our thesis.

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

Zacks Investment Research

European equities traded in the US as American depositary receipts were moving lower late Wednesday morning, declining 0.30% to 1,306.85 on the S&P Europe Select ADR Index.

From continental Europe, the gainers were led by medical device maker EDAP TMS and petroleum refiner Equinor , which rose 11% and 2.9%, respectively. They were followed by telecommunications company Nokia and biopharmaceutical company argenx , which were up 2.2% and 2%, respectively.

The decliners from continental Europe were led by biopharmaceutical company Genfit and telecommunications company Ericsson , which dropped 4.4% and 4.1%, respectively. They were followed by biopharmaceutical company Cellectis and brewing company Anheuser-Busch InBev , which were down 2.8% and 2.1%, respectively.

From the UK and Ireland, the gainers were led by biopharmaceutical company Biodexa Pharmaceuticals B and insurance firm Prudential , which increased 3.1% and 1.5%, respectively. They were followed by biopharmaceutical company Bicycle Therapeutics and financial services company Barclays , which were up 1.1% and 0.8%, respectively.

The decliners from the UK and Ireland were led by pharmaceutical company Silence Therapeutics and biopharmaceutical company Akari Therapeutics , which lost 15% and 5.6%, respectively. They were followed by medical device maker Smith & Nephew and utilities company National Grid , which were off 1.8% and 0.8%, respectively.

Target Corporation TGT reported third-quarter fiscal 2024 results, with the top and bottom lines falling short of the Zacks Consensus Estimate. While revenues saw a slight increase, earnings took a significant hit compared to the prior year due to cost pressures.

This Minneapolis, MN-based company posted comparable sales growth, but the pace slowed considerably from the preceding quarter. While comparable store sales declined, the drop was more than offset by an increase in comparable digital sales.

In response to lower-than-expected results, Target revised its fiscal 2024 earnings forecast downward. The retail bellwether also offered a cautious outlook for the final quarter, leading to a drop in Target’s shares during the pre-market trading session.

Target’s Quarterly Performance: Key Metrics and Insights

Target reported adjusted earnings of $1.85 per share, which missed the Zacks Consensus Estimate of $2.29 and declined from $2.10 reported in the year-ago period.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The big-box retailer generated total revenues of $25,668 million, which came below the Zacks Consensus Estimate of $25,910 million. However, the metric improved 1.1% on a year-over-year basis. We note that sales rose 0.9% to $25,228 million, while other revenues jumped 11.5% to $440 million.

Meanwhile, comparable sales rose 0.3% in the third quarter, following a 2% increase in the preceding quarter. The metric reflected a decline of 1.9% in comparable store sales but an increase of 10.8% in comparable digital sales. We had expected a comparable sales increase of 1.8% for the quarter under discussion.

While traffic improved by 2.4%, the average transaction amount declined by 2%. Target saw beauty comparable sales increase by more than 6%, while the Food & Beverage and Essentials categories grew in the low-single digits year over year.

The gross margin contracted 20 basis points to 27.2%, against our expectation of a 90-basis point improvement. This can be attributed to higher digital fulfillment and supply-chain costs resulting from increased inventory levels, a rise in digital sales volume and new supply-chain facilities coming online. These were partly mitigated by lower book-to-physical inventory adjustments and the net effect of merchandising activities compared to the previous year.

The operating margin shrunk to 4.6% from 5.2% in the corresponding period last year. We had anticipated a 40-basis point improvement in the operating margin.

Target Corporation Price, Consensus and EPS Surprise

Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote

Target’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $3,433 million, long-term debt and other borrowings of $14,346 million and shareholders’ investment of $14,489 million. During the quarter, Target paid out dividends of $516 million.

Target repurchased 2.4 million shares worth $354 million during the quarter under review. At the end of the quarter, the company had about $9.2 billion remaining under the repurchase program approved in August 2021.

A Sneak Peek Into TGT’s Outlook

Target anticipates comparable sales to be flat in the fourth quarter of fiscal 2024. Both GAAP and adjusted earnings for the final quarter are expected to fall in the range of $1.85-$2.45 per share compared with $2.98 reported in the year-ago period.

However, Target now anticipates GAAP EPS and adjusted earnings for the fiscal year in the band of $8.30-$8.90 per share compared with the $8.94 reported in fiscal 2023. Earlier, the company had guided earnings between $9.00 and $9.70.

Shares of Target have advanced 9.5% year to date compared with the industry’s growth of 22.7%.

Don’t Miss These Solid Bets

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 15.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.2% and 29.6%, respectively, from the year-ago reported numbers.

McCormick & Company MKC is a global food company that manufactures, markets and distributes spices, condiments, seasoning mixes and other flavoring products. It currently carries a Zacks Rank #2 (Buy). MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick & Company’s current financial-year sales and earnings suggests growth of around 0.6% and 8.2%, respectively, from the year-ago reported numbers.

Freshpet FRPT, which manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently carries a Zacks Rank #2. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.3% and 224.3%, respectively, from the year-ago reported numbers.

Zacks Investment Research

McCormick & Company, Incorporated MKC has raised the quarterly dividend by three cents or 7.1% to 45 cents per share. The next dividend payment is scheduled for Jan. 13, 2025, for its shareholders on record as of Dec. 30, 2024.

This highlights the company's 101st year of continuous dividend payments and the 39th consecutive year of a quarterly dividend hike, demonstrating MKC’s long-term commitment to its shareholders and dedication to returning excess cash through consistent dividend increases.

McCormick has made notable strides in strengthening its financial foundation and increasing shareholder value. In the first nine months of fiscal 2024, the company returned $338.3 million to its shareholders through dividends, while net cash provided by operating activities totaled $463.2 million. The company remains focused on allocating cash toward growth investments, shareholder dividends and debt reduction while maintaining a strong investment-grade rating.

What More Should Investors Know About MKC?

McCormick has been seeing strong momentum driven by three key factors, long-term trends driving its categories, strong consumer interest in healthy and flavorful cooking and enthusiasm for flavor exploration and trusted brands. The company continues to bolster its position across major markets and core categories by focusing on growth levers such as brand marketing, product and packaging innovation, category management and proprietary technology. This innovation-led growth strategy aligns with McCormick’s long-term goal of capturing increased market share, especially in high-growth segments.

McCormick achieved positive volume growth in the third quarter of fiscal 2024, despite the challenging environment and anticipates this momentum to continue into the fourth quarter. The company experienced sequential volume improvements across both Consumer and Flavor Solutions segments, with the Consumer segment in the Americas, EMEA and Asia Pacific regions, excluding China, demonstrating solid volume growth. This growth indicates MKC's continued focus on innovation, alignment with consumer trends and expanding distribution.

Apart from this, the company has been benefiting from its cost-saving initiatives, which are aimed to fund future investments and drive operating margin expansion. The company’s Comprehensive Continuous Improvement and Global Operating Effectiveness programs are driving growth investments and operating margin expansion. For fiscal 2024, the company is focused on strengthening its volume trends and prioritizing investments to fuel profits. Management expects adjusted operating income to grow 4-6% in fiscal 2024, including minimal currency impacts.

Final Words on MKC

McCormick has been experiencing positive volume growth across both of its segments, Consumer and Flavor Solutions, implying its ongoing focus on innovation, alignment with consumer trends and expanding distribution. The company’s strong financial stability and dividend track record further highlight its resilience and potential for sustained growth.

The Zacks Rank #2 (Buy) stock has risen 15.2% in a year against the industry’s decline of 1.2%.