Insider buying accelerated last week and executives at small and regional banks gobbled up stock as the sector remains under pressure. Despite the thick roster of potentially discounted regional bank stocks, we went in a completely different direction.
Tyson Foods, Inc. (TSN) Chief Executive Officer (CEO) and President Donnie King might have the band Foreigner high on his Spotify playlist, specifically Feels Like the First Time. The Foreigner debut album was released in 1977. Five years later, King began his career at Tyson in the poultry segment.
Tyson Foods is one of the world’s largest food companies and a recognized leader in protein. Founded in 1935 by John W. Tyson and grown under four generations of family leadership, the company has a broad portfolio of products and brands like Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp, and State Fair.
We can’t say for sure that it’s the first time, but we can say it’s the first time in the last 20 years that CEO King bought the food company’s stock. On Thursday, May 11, 2023, the President and CEO acquired 10,350 shares at $48.35 for a total investment of $500,423. Prior to his recent purchase, King was a pure seller, unloading more than $35.5 million in stock from December 2009 through August 2016. (1)
We call it a change of heart when a mass seller turns buyer.
King’s timing is interesting as his maiden buy comes after the company announced disappointing earnings and reduced its guidance for the rest of the year. Management lowered its sales expectations to $53 billion to $54 billion from its previous outlook of $55 billion to $57 billion. (2)
The CEO told analysts and investors on the quarterly conference call, “Cutout values across protein complex are much lower than a year ago. Inflation has also remained elevated and persistent, which has dramatically impacted our cost. The current macro backdrop is clearly tough. We have a strong growth strategy and are bullish on our long-term outlook.” (3)
While King might be bullish longer-term, investors were not in the immediate aftermath of the most recent quarterly report card. On May 5, 2023, TSN closed at $60.69 and was nearly $10 lower 24-hours last, closing at $50.73 on May 6th. In fact, the stock went on to set a 52-week low of $47.11 on May 10th. King bought it the next day, the 11th, which coincided with the company announcing a dividend of $0.48 per share for Class A stock and $0.432 for class B stock. (4) The current annual dividend yield for TSN is 3.93 percent. The best we can tell, Tyson has paid shareholders dividends going back to 1989. (5)
As of now, Wall Street sees the food processor trading at $57.89 in the next 12 months; although, price targets are likely to slip as analysts release updated reports reflecting second quarter results. (6) As we type, the stock trades at $48.87.
OVERALL: Challenges are likely to continue for Tyson Foods, Inc. (TSN). However, they are one of the leaders in the meat business and will recover at some point. The question for shareholders is how long? Tyson’s current dividend yield should give investors some comfort as they wait.
TSN is only appropriate for investors with above-average risk tolerance and at least a two-year time horizon.
1 – https://www.secform4.com/insider-trading/1415534.htm
2 – https://finance.yahoo.com/news/tyson-cuts-meat-sales-outlook-111438927.html
3 – https://www.fool.com/earnings/call-transcripts/2023/05/08/tyson-foods-tsn-q2-2023-earnings-call-transcript/
4 – https://finance.yahoo.com/news/tyson-foods-announces-quarterly-dividend-201700577.html
5 – https://seekingalpha.com/symbol/TSN/dividends/history
6 – https://finance.yahoo.com/quote/TSN?p=TSN