Analyst downgrades Tyson Foods stock amid conspiracy claim
by October 7, 2016 1:30 pm 246 views
A “powerfully convincing” class-action lawsuit has led a New York-based analyst to change Tyson Foods Inc.’s stock rating to “sell” amid allegations of a broiler price-fixing conspiracy.
On Friday (Oct. 7), Pivotal Research Group slashed Tyson Foods’ target price to $40, from $100, and shifted its rating to sell, from buy. Springdale-based Tyson Foods was named as a defendant in the suit that was filed in U.S. District Court for the Northern District of Illinois on Sept. 2.
“The complaint alleges that Tyson, together with Koch Foods and multiple other players in the broiler chicken business, systematically colluded to reduce production of broilers since about 2008,” according to a report by Timothy Ramey, chartered financial analyst, for Pivotal.
The supply collusion happened through “non-public data exchange,” the report shows.
“The case is made that the colluding participants share data with Agri Stats who complies and anonymizes the data, then sells it back to the industry participants.”
That companies use Agri Stats Inc. isn’t in dispute, but its data “has telling clues as to the identity of the other industry participants such that it is easy for the industry to collude on production cuts since they provide non-public information to Agri Stats on future production intentions,” according to the report.
Pivotal doesn’t claim that Tyson Foods colludes on chicken pricing or production as the suit does, the report shows. But if the suit’s allegations are true, “it explains why Tyson can offer EPS guidance with remarkable precision — boasting of margins at record levels well into the future.”
Tyson Foods responded to the Pivotal report in a statement Friday (Oct. 7): “An analyst report has been issued this morning commenting on pending antitrust litigation which was filed over a month ago. While we don’t normally make substantive comments regarding pending litigation, we dispute the allegations in the complaints as well as the speculative conclusions reached by the analyst, and we will defend ourselves in court. Contrary to what the analyst assumed, we have not made any changes to our business practices in response to the complaints.”
Tyson’s shares (NYSE: TSN) were trading at $67.91, down $6.47 or 8.7 percent at midday Friday (Oct. 7). Shares have traded between $42.89 and $77.05 in the past 52 weeks.