Tyson Foods CEO Gets Wall Street Fan Mail After Turnaround

February 11, 2016 01:05 PM

Tyson Foods Inc.’s Donnie Smith is getting the kind of notices from Wall Street that most CEOs dream about as a strategic overhaul at the largest U.S. meat producer begins to pay off.

Tyson shares gained 5.4 percent Monday, the second-biggest advance in the Standard & Poor’s 500 Index. That follows a rally on Friday, when the company raised its full-year profit forecast after better-than-expected earnings for the final three months of 2015.

While lower feed costs are aiding Tyson, it’s management more than any tailwind that’s helping the company outperform expectations, Dwight Anderson, founder of New York-based commodities hedge fund Ospraie Management LLC, said in an interview with Bloomberg Television Friday. The company’s transformation, “given the hand Mr. Smith inherited, is truly remarkable,” Tim Ramey, a New York-based analyst for Pivotal Research Group LLC, said in a report on Monday.

Tyson Foods Carves up Increased Earnings



“We are big fans of Donnie Smith,” Brett Hundley, a Richmond, Virginia-based analyst for BB&T Capital Markets, said in a telephone interview.

Smith, 56, is a Tyson lifer. He joined its poultry operations in 1980 and later moved to the company’s headquarters in Springdale, Arkansas, to work as a commodity buyer, according to the company’s website. He was appointed CEO in 2009, a time when the meat industry was “reeling” as profits plunged on record feed costs, according to Hundley.

Hillshire Deal

Smith was instrumental in the 2014 acquisition of Hillshire Brands Co., adding products such as Jimmy Dean sausages to build up Tyson’s higher-margin prepared-foods segment while reducing its reliance on the more volatile commodity meat business.

Smith and his team shifted to a “buy-versus-grow” strategy of raising fewer chickens than the company slaughters and purchasing additional meat on the open market. Tyson has also found new ways to use lower-priced dark chicken meat, most of which usually ends up being exported. Management has delivered record chicken profitability amid the lowest industry margins since mid-2011, Ken Zaslow, an analyst at BMO Capital Markets, said in a report Monday.

Shares of Tyson, which also processes pork and beef, closed at a record $60.16 in New York. Zaslow increased his price target on the stock to $62 from $53 while Ramey at Pivotal raised his to $100 from $65.

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