Tyson Foods downgraded to Sell from Hold at Pivotal Research
Pivotal analyst Timothy Ramey downgraded Tyson Foods to Sell and slashed his price target to $40 from $100 due to the broiler price-fixing alleged in the class action complaint filed on September 2. Ramey said the complain alleges supply collusion occurred through nonpublic data exchange; detailed industry reports compiled on a daily or weekly basis by Agri Stats. Supposedly, the data has telling clues as to the identity of the other industry participants, making it is easy for the industry to collude on production cuts since they provide non-public information to Agri Stats on future production intentions. The analyst wondered why margins improved dramatically over the past seven years in a historically undisciplined industry. Ramey believes the class-action suit has merit and will lead to intense scrutiny of the broiler industry and questions the sustainability of chicken margins. He expects Tyson shares will be pressured until this complex issue is resolved and damages could be very substantial.