Investors are evincing strong interest in alternative food companies that produce plant-based meat products and dairy-free products. There is a growing tribe of such companies including Beyond Meat (BYND), Impossible Foods, Hungry Planet, Perfect Day, and Swedish oat drink company, Oatly, which is expected to list on the NASDAQ shortly.
Such companies are providing stiff competition to traditional protein-based food companies like Tyson Foods (TSN).
According to a ResearchandMarkets report, the plant-based meat market globally is expected to be worth $13.28 billion this year compared to $11.86 billion last year and is expected to grow to $20.78 billion by 2025, indicating a compound annual growth rate (CAGR) of 12%.
Using the TipRanks Stock Comparison tool, let us compare the plant-based meat company, Beyond Meat, with the protein-based food company, Tyson Foods, and see how Wall Street analysts feel about these stocks.
Beyond Meat (BYND)
Earlier this month, Beyond Meat reported first-quarter results with revenues of $108.2 million up 11.4% year-on-year, while adjusted net loss was $27.3 million versus a net income of $1.8 million in the same quarter last year. The company sells its products through a variety of retail channels and by partnering with quick-service restaurants (QSRs).
Beyond Meat President and CEO Ethan Brown commented, “We were pleased to see sequential improvement in our revenue growth and gross margin performance despite continued COVID-19 pressure on our foodservice business. Throughout the first quarter, we remained highly focused on investing in and building out production infrastructure in the U.S., the EU, and China; new product development and commercialization for our strategic QSR customers and retail markets; and research and development in service to our core growth levers of taste, nutrition, and cost.”
The company did not provide any financial guidance for FY21 due to the pandemic and evolving demand patterns across its retail and QSR channels. However, BYND expects net revenues to land between $135 million and $150 million in Q2, indicating year-on-year growth of between 19% and 32%.
BYND is following a multi-faceted strategy when it comes to domestic and international markets. In domestic markets, the company is scaling up its commercial production at its Pennsylvania plant that was acquired last year, while it is adding new production lines at its facilities in Columbia, Missouri.
The company is also looking at pricing its plant-based meat products in every category below animal-based protein products by the end of 2024. BYND is looking at doing this through localized production near its high-priority markets, integrated production process across its manufacturing network, improved cost efficiencies, and continuous innovations when it comes to its products and processes.
BYND has also ramped up its marketing efforts as indicated by the company’s recent mobile pop-ups in select cities across the United States to offer customers free and exclusive first tastes of its new products before they become available in stores. Increased awareness and excitement among its consumers are being achieved through higher social media activity and other marketing programs.
Last week, the company announced the second major expansion of its product offerings with Beyond Meatballs expected to be available across 2,100 Walmart (WMT) stores from June.
BYND has also entered into a global strategic partnership with Yum!Brands (YUM) to create and offer plant-based protein menu items that will be available only at YUM’s KFC, Pizza Hut, and Taco Bell restaurants. (See Beyond Meat stock analysis on TipRanks)
In international markets, BYND has started full commercial production at its new facility in Jiaxing, China, and the company is looking at expanding its distribution footprint through more tie-ups with international retailers and adding new stock-keeping units (SKUs) to existing company outlets.
Following BYND’s earnings, Oppenheimer analyst Rupesh Parikh reiterated a Hold on the stock. Parikh said in a research note to investors, “Challenges in foodservice, an aggressive investment agenda, and margin headwinds continue to weigh upon profitability. Consistent with our prior commentary, we view Street projections as overly optimistic and would await a full reset before becoming involved in shares. We continue to be optimistic that a post COVID-19 environment coupled with recent partnerships could lead to improved fundamentals down the road, but the N-T outlook remains still quite challenging.”
Overall, consensus among analysts is a Hold based on 2 Buys, 6 Holds, and 4 Sells. The average analyst price target of $122.60 indicates upside potential of around 19.6% from current levels.
Tyson Foods (TSN)
Tyson Foods is a protein-based meat company that sells its products under four different business segments. These include beef, pork, chicken, and prepared foods. Internationally, the company operates in countries like China, Australia, Malaysia, Mexico, the Netherlands, South Korea, and Thailand.
Tyson has a broad portfolio of products and brands including Jimmy Dean, Hillshire Farm, Tyson, Ball Park, Wright, Aidells, ibp, and State Fair. Last week, the company reported its second-quarter results.
TSN posted revenues of $11.3 billion, up 3.8% year-on-year, while adjusted earnings of $1.34 increased 68% year-on-year. The company reported an adjusted operating margin of 6.5% and had reduced its debt by around $1 billion at the end of the second quarter.
Last week, the company announced the sale of its pet foods business to General Mills, Inc (GIS) for $1.2 billion. The sale is expected to close at the end of FY21. However, TSN will continue to provide meat ingredients for the pet foods business after GIS assumes ownership of the business.
In FY21, TSN expects sales of between $44 billion and $46 billion with capex anticipated at the lower end of the $1.3 billion to $1.5 billion range. The company expects to incur an additional expense of $365 million in FY21 as a result of the pandemic and anticipates that some of these expenses could become permanent over time.
According to the US Department of Agriculture (USDA), beef production is expected to increase by around 3% in FY21, which could result in higher sales for TSN. The Beef business segment contributed $4 billion and made up 35.8% of the company’s total revenues of $11.3 billion in Q2.
Tyson expects lower operating margins for the Chicken and Pork businesses in FY21 compared to FY20. This is due to the lower expected production of pork and chicken coupled with an increase in chicken feed costs in FY21.
The company’s prepared foods business’ earnings are expected to be flat year-on-year because of higher inflation, especially in the second half of the year, an increase in raw material costs, and a change in consumer behavior as a result of the pandemic.
Importantly, TSN is also looking at targeting plant-based meat consumers with the nationwide launch of its Raised & Rooted products, which introduced three new products in the second quarter. Raised & Rooted offers plant-based meat and meat alternatives to its consumers. (See Tyson Foods stock analysis on TipRanks)
Last week, Barclays analyst Benjamin Theurer raised his price target from $83 to $89 and reiterated a Buy on the stock. The analyst remained upbeat on the stock following its second-quarter results and believes that the current dynamics of the beef industry are quite strong to support TSN’s results. Theurer also added that management was now focused on resolving the issues concerning the chicken business segment and that bodes well for the company.
Overall, consensus among analysts is a Moderate Buy based on 4 Buys and 5 Holds. The average analyst price target of $81 indicates that the stock is fairly priced at current levels.
Competition in the plant-based meat market is heating up as indicated by the increase in new entrants and TSN’s move to target this market through its Raised & Rooted brand.
Analysts seem to be in a wait-and-watch mode with BYND as the company continues to face rising competition while margin pressures continue to hamper profitability.
In contrast, analysts are cautiously optimistic about TSN. The stock appears to be fairly priced at current levels, and the company is targeting both protein-based and plant-based meat consumers with its wide array of products.