Sort & Cull

When Tyson CEO Donnie Smith jumped on Monday’s conference call with market analysts he was understandably as ebullient as Donald Trump reading the latest polls. It’s tough to hide a smile when things are going your way.

All the sweeter if you can somehow manage to beat the house with its own loaded dice.

Despite rising supplies of the meats and continued fallout from a severe U.S. bird-flu outbreak earlier this year, Tyson Foods unveiled better-than-expected fourth quarter profits (i.e., $258 million, nearly 90% greater than last year). Wall Street was hardly shy in showing its approval, quickly chasing company shares 10% higher to new all-time highs.

Since this initial equity surge on Monday, Tyson paper remains on a roll, scratching yet another record this morning at $50.

Needless to say, investors of all size love a reliable pattern in rising earnings per share (EPS). Not only does Tyson own impressive historical credentials in the regard, its awesome ability to stay on the high road despite the many potholes of 2015 has kicked its sex appeal among money managers to a whole new level.

Tyson and packer friends have been working to rebound from a year in which growing supplies of chicken have pressured prices. The avian influenza outbreak, which led to the deaths of more than 48 million birds, prompted some countries to curtail imports of U.S. poultry, leading to greater domestic supplies. The strong U.S. dollar also has hurt meat exports by making the products more expensive for overseas buyers.

Besides its ability to weather and best such formidable market obstacles, investors like the way Tyson has positioned it future in China. Once China relaxes it ban tied to the avian flu, Tyson plans harness its packaged-foods expertise to develop more consumer-focused products for that country’s sprawling appetite.

Along these lines, many are bullish about Tyson’s futures thank to the company’s acquisition of Hillshire Brands last year, a key strategic move guaranteed to provide a much bigger footprint in packaged foods.

Finally, though the Arkansas giant continues to strategically diversify, its wheelhouse continues to be chicken, a core commodity that is currently enjoying outstanding demand.

With such strong wing filling you sails, it wasn’t surprising that CEO Smith conveyed an abundance of front-office optimism about the year ahead, projecting adjusted EPS to be in the range of $3.50 to $3.65 in fiscal 2016, consistent with the goal of achieving at least 10% annual EPS growth over time.

Besides wondering why my 401k isn’t generously feathered with Tyson Food stock, the only moment in the conference call that stuck me as discouraging was when Smith cautiously considered beef prospect:

"Our chicken business is strong, pork continues to do well, and we think the worst is behind us in beef".

You THINK the worst is behind in beef? Even with cattle feeders losing more than $500 per head, even with beef cut-outs dipping this week to the lowest price levels since early 2014, even with live futures near the bottom of a $30 slide since midsummer, the biggest packer in the land is willing to stick out his neck no further than to say he THINKS the worst has come and gone?

If cattle bears are still looking for the perfect inscription for the 2015 tombstone, one that captures the utter bleakness of market psychology, I think we’ve found it.

(CZ)