The United Nations has estimated that the world’s population will reach nine billion people by 2050, at least one-third more than today.
Surprisingly, estimates are that nearly all of this population growth will occur in urban centers, which are expected to grow from 49% of the world’s population to 70% over that same period.
And with the higher per capita incomes of urban centers, the demand for quality proteins will dominate food production – meaning the amount of meat produced globally will need to increase by more than 200 million tons over the next 40 years.
This means there are opportunities for U.S. meat producers to profit from this growing trend.
Take Tyson Foods, Inc. (TSN), for example…
Springdale, Arkansas-based Tyson Foods is one of the largest meat producers in the United States, and the world’s largest fully integrated producer of chicken and poultry-based food products.
Currently, the company produces nearly 20% of the chicken, beef, and pork in the United States – and owns a diversified portfolio of retail foods brands including Hillshire Farms, Jimmy Dean, Sara Lee, and Ball Park.
The good news for investors is that the company is enjoying a bit of a resurgence, which will help the food maker continue to make gains as the global population grows.
On Monday, shares of Tyson spiked 5.8% higher on heavy trading. The stock closed the session at $43.03 with nearly 8.6 million shares trading hands.
This compares to the company’s average 10-day trading volume of 3.4 million shares.
And this follows an impressive two-year run. Tyson has experienced an impressive 129.8% growth rate during that time, compared to 47.9% for the S&P 500 Index (^GSPC).
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The catalyst for Monday’s strong move up was the company’s Q4 2014 results, which came in higher than analysts had forecast.
According to its release, Tyson Foods’ adjusted net income per share grew to $0.87 on a per-share basis, beating analysts’ expectations of $0.76 for the quarter.
This represents a 24.3% increase over the $0.70-per-share adjusted net income reported in Q4 2013 and 32% for FY 2014 versus FY 2013.
The company grew revenue 9.3% for the fiscal year compared to 2013, and reported record sales of $10.11 billion in the fourth quarter – a 13.7% increase from last year’s Q4 sales of $8.89 billion.
Tyson Foods said its sales were pushed higher due to a rise in prices in its pork and beef segments, as well as an increase in volume for its prepared-foods business from its recently completed acquisition of Hillshire Brands Co.
While full results from the Hillshire acquisition were hampered by a fire at one of its plants earlier this year, operating income increased in the prepared foods division by $64 million for the fourth quarter.
More importantly, however, Tyson expects the Hillshire acquisition to add approximately $4 billion to Tyson’s sales in FY 2015, while also helping the company reach its goal of 10% to 12% return on sales by FY 2017.
Investors would be well served to consider buying shares of this food powerhouse.
The company will experience very strong EPS growth for the next three to five years as the synergies of the Hillshire acquisition really bear fruit – and, in turn, result in a high-flying stock price.