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Summary of Operations
Tyson Foods is a producer of meat and protein-rich foods, with four segments: Chicken, Beef, Pork, and Prepared Foods. The chicken segment is vertically integrated, wherein they raise their own stock, but the other three segments depend on the purchase of stock and raw materials from suppliers. These foods are then sold to wholesalers, restaurants, grocery stores, among other customers. Wal-Mart is the largest customer, accounting for 18% of revenues in 2021, with no other customer exceeding 10%. Most of its operations and sales are within the United States.
Strategy
Tyson utilizes the popularity of its brands and successful marketing to drive demand for its products. With scale, it leverages these into large deals with customers and also a well-managed, internal supply chain. While COVID has posed health and safety costs specific to food production, their sophisticated supply chain has allowed them to avoid many setbacks. Operating margins actually grew from 2019 to 2020 and from 2020 to 2021, in spite of disruptions from COVID. They were also able to shift sales from food service customers to retail. This flexibility is proof of their model against adversity.
Growth and the Future
With scale being its tool, Tyson’s growth will depend on improving these efficiencies while also acquiring new businesses/brands that it can integrate into its model. Otherwise, the company is financially healthy and should enjoy modest gains if it continues along.
Valuation
Growth Assumption: 7%
Intrinsic Value Per Share: $98
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