Seeking Alpha: BRF Tastes Better Than It Looks

The real reason to own Brazilian poultry and processed food giant BRF (NYSE:BRFS) is for the company's long-term leverage to a shift away from commodity protein toward processed food (think more Hormel (NYSE:HRL)/Oscar Mayer and less Tyson (NYSE:TSN)/Pilgrim's Pride (NASDAQ:PPC)) and its growing emerging market presence out of Brazil. That said, the market is still a quarter-to-quarter weighing machine and BRF posted a confusing set of first quarter results that were better than they may first seem.

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BRF Tastes Better Than It Looks

Investopedia: Tyson Foods Continues To Leverage Strong Margins In Proteins

As many packaged food companies start to stumble and sputter, Tyson Foods (NYSE:TSN) appears to be picking up steam. With generally solid volume and pricing trends across the business and lower feed costs boosting margins, Tyson is starting to draw the “it's different this time” bullish arguments. It's hard to argue with a stock that has nearly doubled over the past year, and management's guidance sounds pretty solid, but investors buying today need to hope for strong grain harvests and restrained competition going forward.

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Investopedia: Sanderson Farms Riding Investor Enthusiasm For Protein

Investors are certainly feeling a little more carnivorous these days, as optimism over improving prices and margins has pushed the shares of companies like Tyson (NYSE:TSN) to all-time highs. It certainly has hurt matters even slightly that Smithfield (NYSE:SFD) just bagged a takeout offer at a premium price as well. That leaves investors with a tough choice with the country's third-largest poultry producer Sanderson Farms (Nasdaq:SAFM). It's very difficult to goose the numbers high enough to make this stock look cheap on a long-term basis, but the near-term momentum could make selling today look like a chicken move.

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Investopedia: Will Tyson Serve The Bulls Or Serve Up The Bulls?

It's really too bad that Tyson Foods (NYSE:TSN) doesn't offer a breaded or Buffalo-style crow, as I have to eat a plateful of it with this stock. I didn't like this stock back in the fall of 2012, and thought that the post-earnings reaction then was overdone. As it turns out, though, the stock had another 28% left to appreciate, making it a very solid performer in what has been a strong consumer sector overall.

At the risk of doubling down on a bad call, I'm still not very partial to this stock. Although I do believe that Tyson has the opportunity to grow its international and packaged foods businesses and generate meaningfully better margins, this quarter's margin under-performance highlights just how challenging it can be to deliver on a quarter-to-quarter basis. In the context of what increasingly looks like an overheated consumer sector, I'd be careful about piling into Tyson shares today.

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Investopedia: Sanderson Farms Does OK This Quarter, But Long-Term Value May Be Elusive

Protein production is a tough, low-margin business. Like most other tough, low margin businesses, it's also difficult to build real economic moats and create long-term shareholder value. So while Sanderson Farms (Nasdaq:SAFM) deserves credit for a decent quarter during challenging times, investors would likely do well to regard this name as more of a trading opportunity than a long-term core holding.

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Investopedia: Can Hormel's Model Shine With The Drought?

Processed foods may not be healthy for us as consumers, but they certainly don't do the producers any harm. Whether you look at a five, 10 or 15-year chart, the performance of Hormel (NYSE:HRL) simply blows away the likes of Tyson (NYSE:TSN), Smithfield (NYSE:SFD) or Pilgrim's Pride (NYSE:PPC). Sure, some of that can be laid at the feet of superior management, but the reality is that it's much better to be the maker of branded processed foods than a virtual commodity supplier of fresh or frozen protein.

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Investopedia: Tyson Finally Interesting, But Risks Growing

I've stuck to my guns that giant protein producer Tyson Foods (NYSE:TSN) was not an interesting stock until and unless the shares started trading for below book value. Now with worries about rising grain costs and limited additional pricing leverage, the stock may finally be cheap enough to own, but investors must also consider the risk that conditions could get substantially worse before they get better.

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Investopedia: Cauton On Sanderson Farms Isn't Being Chicken

Investing in commodities is hard enough, but investing in those companies that produce intermediate commodities stuck between uncontrollable cost and uncontrollable prices is even more difficult. Stocks like Sanderson Farms (Nasdaq:SAFM) can definitely outperform in periods where protein supplies are scarce and/or costs suddenly drop, but it's difficult to make long-term money in stocks like these.

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Investopedia: Nothing New Under The Tyson

looked a little expensive coming out of fourth quarter earnings and the stock was weak through March and April. Tyson's second quarter earnings were better than expected, and the company's progress on margins is laudable. That said, the Tyson Foods story really hasn't changed all that much and the stock is not an especially compelling bargain today.

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Seeking Alpha: Brasil Foods - Little Expected, Even Less Delivered

Even good companies will try the patience of investors from time to time, and that's the story today on Brasil Foods (BRFS). Although nobody really thought major export markets like Japan, Russia, or the Mideast were going to turn around on a dime, they managed to get even worse than expected. The good news, though, is that Brasil Foods remains one of the strongest consumer plays in one of the largest emerging markets, not to mention one of the best export-leveraged food companies in the world.

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Brasil Foods: Little Expected, Even Less Delivered

Investopedia: Don't Pig Out On Smithfield Foods

With export demand running strong and grain prices easing, protein producers like Smithfield (NYSE:SFD), Tyson (NYSE:TSN) and Pilgrim's Pride (NYSE:PPC) have been strong this fall. The trouble, though, is that a strong run doesn't erase a basic problem with these companies - they seldom ever earn much (if anything) above their cost of capital, and it's difficult to argue paying any premiums to book value to own these shares.

Less Bad Is Good for the Second Quarter  
Smithfield's second quarter highlights how strange the Wall Street world can be, as the company's performance in absolute terms was not all that great. Performance was better than expectation, though, so it will go down as an all-in-all solid performance.

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Investopedia: Tyson Already Looks Overcooked

When last I reviewed Tyson Foods (NYSE: TSN), I commented that it would be an interesting stock to buy around one times book value. As it turns out, the stock briefly touched that level and had a decent run from there. Now, though, it seems there are growing expectations of improvement in the chicken market and sustainable profitability in beef and pork; so much so that there really doesn't seem to be much upside left in these shares.


Familiar Challenges Close Out the Fiscal Year 
A lot of what went on in Tyson's fiscal fourth quarter will sound familiar. Sales growth looked impressive at nearly 13%, with very strong price growth in excess of 12% and very modest volume growth of less than 1%. Top line growth was led up an impressive 16% in beef, where prices rose almost 19%, and 14% in pork. Chicken revenue rose a more sedate 9% and prepared food revenue rose less than 4%, on a nearly 3% decline in volume.


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Investopedia: Tyson Almost Ready To Serve

For the most part, the average investor should approach Tyson Foods (NYSE:TSN) with skepticism. It is the top player in America in its respective markets, but that has never translated into a sustained attractive margin structure or free cash flow record. On the other hand, savvy investors don't turn away from profit-making opportunities, and Tyson's stock may be very close to a point where there is real money to be made. 



Familiar Themes Dominate the Third Quarter  
Investors who have been following agribusiness are not going to see too many surprises in Tyson's fiscal third quarter results. Revenue was not too bad, as Tyson reported 11% sales growth on a combination of better-than 12% higher pricing and slightly worse than a 1% decline in volume. Sales growth was fairly balanced - all of the major categories had significant sales growth, with beef leading the way at 13.5% price increase. The relatively small prepared food business was the laggard at 9% growth.

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