Tyson Foods exec says the company is ready for another acquisition, stock price jumps

Tom Hayes, president and soon-to-be CEO of Tyson Foods, said he’s tasked with growing the business and that will likely include acquisitions or investing in  other companies.

Hayes and Chief Financial Officer Dennis Leatherby spoke Wednesday (Dec. 7) at the Bernstein Consumer Summit held in New York City. In addition to speaking about growth strategies, the execs defended the company against the allegations of price collusion and pending antitrust class actions lawsuits.

Investors liked what they heard from Hayes and Leatherby as Tyson Foods shares (NYSE: TSN) rallied Thursday nearly 5% to close at $61.59, up $2.77 on the day. Hayes told investors nine weeks into the company’s fiscal first quarter of 2017 he’s predicting the best quarterly results in Tyson’s history. Hayes said Tyson will give an update on guidance when it reports first quarter results in February.

Leatherby also reminded investors that 2016 was a great year for the company overall, despite a slight stumble in the fourth quarter. He said Tyson returned $1.7 billion to shareholders in stock buybacks last year and has bumped up the 2017 cash dividend to 90 cents for the year, up from 60 cents in 2016.

“We are ready to do another Hillshire size acquisition if it’s available and it’s exciting to see what our future has in store,” Leatherby said.

Tyson expects in fiscal 2017 its chicken business will have a margin between 9-11%, with pork margins expected to be 10% or more, beef at the high end of its normalized range of 3%, and prepared foods will be 10% or better.

When asked how the New Ventures Fund will fit into Tyson’s growth strategy, Hayes said the company has been thinking and talking about a venture capital fund, but it was Monica McGurk, executive vice president of strategy and new ventures and president of foodservice for Tyson Foods, who continually encouraged the executive team to think differently about growth opportunities. McGurk recently joined the company from Coca Cola.

Hayes said Tyson is often contacted about trying new technologies, but it’s been a somewhat fractured process. He said the New Ventures Fund unites a team around the ideas and creates a funnel that should be a better way to handle it. He said Tyson is interested in sustainability-related technology applications because they are important to consumers. Hayes said Tyson has to do a better job with its transparency and it’s an area he’s committed to improving. He said there are opportunities in food waste, internet of food and robotics.

“We hope to better understand the possibilities there and we can do that by taking minority stakes in startups that try and solve those problems. It also puts us in a good place,” he said.

Hayes said Tyson wants to be in as many protein categories as possible which is why the New Ventures Fund took a stake in Beyond Meat.

When asked to clarify Tyson’s position on the pricing allegations related to the Georgia Dock and the antitrust laws filing in recent weeks, Hayes said Tyson looks at the allegations as personal attacks on the company’s integrity and executives are looking forward to defending their position in court. Again, he said Tyson’s exposure to Georgia Dock pricing remains very low at 3.5% to 4% of total volume. The company did sign an affidavit that stated all pricing was accurate in the past and will be in the future.

Hayes said he’s looking forward to keeping the company on a growth trajectory as he takes the wheel from Donnie Smith, who is retiring from day-to-day operations at the end of the year.

“We have big opportunities with tremendous categories that will be leveraged for additional shareholder growth. We will take a proactive approach to sustainability, our innovation pipeline is full so look for some great new products. We will invest against the business in the right way and don’t be surprised if we pull an acquisition or two,” Hayes said.