By LM Lupo & Financial Trader Research, published 1.28. 2007

Fundamental Storm Brewing

As with all of our company specific equity analysis, we utilize the Lupo-Kioutas Enterprise Business Model© to determine a company's core profit engine that drives actual earnings and revenue.  Below is a brief report card from  the model as it pertains to Tyson.  For more on the enterprise business model click here.

Lupo-Kioutas Enterprise Business Model Report Card© for Tyson

Tyson receives our lowest enterprise grade to date, for 2007, based on their collapsing engines of profitability, very poor governance, and policy model. 

We have been forecasting corn costs to reach the $6.00 level in 2007, per our earlier corn futures reports here, which will significantly compress Tyson's operating margins.  With Tyson's input costs soaring, any price hikes intended to be passed on to the consumer, particularly in the quarters market (wings), will be thwarted by ample competitive supplies and the unfortunate H5N1 human influenza disease mislabeled by the press as 'bird flu'. 

Chicken prices have recovered since the start of the H5N1 pandemic awareness, but as markets go, we are currently at the nadir of interest and reporting.  This is likely to change in the near future as more western country's begin reporting actual H5N1 findings, which unfortunately for the poultry industry will be with trumpeted headlines:  a future text book public relations case study. 

The majority of Tyson's grade was heavily influenced by their intractable corporate policy of differing shares for investors versus those with voting power.  In summary, leadership without accountability, particularly fiscal, is an inevitable failure that simply awaits the most convenient moment to materialize in privacy and reveal itself later with a thunder in public.  Historically, this type of company structure performs very poorly for investors.

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