Tyson Foods Inc

TSN Details

Decent performance in FY20:  Tyson foods Inc. (NYSE: TSN) is a multifaced food company, which has varied brands under different product which includes Chicken, Beef, Pork and Prepared foods. It has declared yearly results recently, therein it has clocked a $43,185 million of sales with adjusted EBDITA margin of ~10% for the whole year. This is due to better-than-expected sales owing to better sales realisation although volume has gone down. In FY20, the company has recorded cash and cash equivalent of $1.42 billion. During the year, the company has made a huge investment for COVID-19 protective measures as they had faced numerous problems in the past. This accounts for ~$540 million for the whole financial year for the COVID related issues.

Key Financial Metrics (Source: Company Reports)

Outlook: For FY21, the company expects revenues to be in the range of $42 to $44 billion (previously $42 billion) and Capex in the range of $1.2 billion and $1.4 billion (previously $2.92 billion), owing to higher consumption driven by retail and expected to be continued recovery in the Chicken and Prepared food segments.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Key Growth Strategies: The company will be able to post growth in the top-line with growing consumer demand across Chicken and Prepared foods segments. However, Beef and Pork segments will lead to moderation in the demand.

Key Risks: On the flip side, the company will witness the rise in operating cost, which may dent the profitability of the company. The increase in cost may come from $ 330 million, which is relating to one-time expense of COVID-19 to keep the health of the people. Moreover, with the increase in capex which the company has slated for the coming years, the interest expense can also go ~$440 million in FY21. As far as industry goes, the company has risk of fluctuation in commodity prices as well.

Stock Recommendation: The stock of TSN is closed at $66.57 with a market cap of ~$23.63 billion. The stock made a 52-week high and low of $85.55 and $42.57, respectively, and is currently trading slightly above the average of its 52-week trading range. On the technical analysis front, the stock has a support level of ~$56.03 and a resistance of ~$70.76. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). Considering the fundamentals with a decent outlook in the long run, valuation, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $64.78, down by 2.69% as on 27 January 2021.

TSN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Exxon Mobil Corporation

XOM Details

Q3FY20 Highlights for the Ended October 2020: Exxon Mobile corporation (NYSE: XOM) is one of the largest explores of oil in the world. It deals both in upstream, downstream and with the allied products of crude oil. The company has declared its third quarter results for 2020, wherein it has recorded a decline of 29% in top-line to $46,199 million, owing to lower crude oil prices coupled with lower demand. However, with lower expenses, the company was able to contain its operating loss to $372 million, which is lower than quarter ended June’2020. During the quarter ended, the company has reduced its capex plan, which is in line with the company announcements. Earnings have been recovering since second quarter which has seen a revival with losses coming down from $1,080 million for quarter ended June 2020 to $680 million in quarter ended October2020.

Capex Trend (Source: Company Reports) 

Outlook: In the upcoming period, the company is expecting a decent performance on the back of improvement in crude oil prices and demand. The company is in the process of reducing its capex and opex in the near term, which will support to improve its bottom-line performance.

EV/EBITDA Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month 

Key Risks: Industry growth decline is a major risk for the company. It may lead to subdued growth in the near term. However, on the flip side, the company might see decent growth as crude oil price is gaining momentum.

Stock Recommendation: The stock of XOM is closed at $45.35 with a market cap of ~$191.75 billion. The stock made a 52-week high and low of $65.73 and $30.11, respectively, and is currently trading slightly below the average of its 52-week trading range. On the technical analysis front, the stock has a support level of ~$31.21 and a resistance of ~$51.71. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). Considering the gradual improvement in demand and crude oil prices, valuation, and current trading levels, we give a ‘Buy’ rating on the stock at the closing price of $45.35, down by 1.13% as on 27 January 2021.

XOM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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