Tyson Foods stock plunges as brokerage says lawsuit may have merit
- AT&T (T) to Acquire Time Warner (TWX) for $107.50/Share
- Rockwell Collins (COL) to Acquire B/E Aerospace (BEAV) for $6.4B
- China Oceanwide to Acquire Genworth Financial (GNW) for $2.7B
- Top 10 News for 10/17 - 10/21: Merger Rumors Abound; CEOs Depart; Tesla Kicks Autopilot Up A Notch
- Wall Street ends little changed; Microsoft hits record
Tyson foods Inc and Hillshire Brands Jimmy Dean sausages are shown in this photo illustration in Encinitas, California May 29, 2014. REUTERS/Mike Blake/File Photo
Get the Pulse of the Market with StreetInsider.com's Pulse Picks. Get your Free Trial here.
(Reuters) - Shares of Tyson Foods Inc (NYSE: TSN) fell 11.5 percent, their biggest intraday percentage drop in more than six years, after a brokerage said a class action lawsuit against the largest U.S. meat processor over industry collusion was "powerfully convincing".
The lawsuit filed last month alleged that Tyson colluded with Koch Foods and others in the broiler chicken business to reduce production since 2008.
Tyson Foods disputed the allegations in the complaints as well as the speculative conclusions in the report.
Pivotal Research Group analyst Timothy Ramey said he was not alleging that Tyson colludes on chicken pricing or production.
However, the brokerage downgraded the company's stock to "sell" from "buy" and cut its price target to $40 from $100, saying the lawsuit would lead to intense scrutiny of the sector.
Tyson's shares were down 9 percent at $67.71 in afternoon trading.
The company's annual profit has grown from $86 million in 2008 to $1.22 billion last year, partly helped by its acquisition of Jimmy Dean sausage maker Hillshire Brands in 2014. The chicken business, Tyson's second-largest by sales, accounted for 63 percent of the company's operating income last year.
Pivotal Research is the only brokerage with a "sell" rating among the 11 brokerages covering the company. At least six brokerages rate the stock "buy" or higher and four "hold".
"Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector," Ramey wrote.
"We have long wondered how an industry marked by such volatility and lack of discipline could morph to a highly disciplined industry where production remains constrained and pricing remains high," Ramey added.
Tyson Foods said it had not made any changes to its business practices in response to the complaint.
(Reporting by Gayathree Ganesan and Sruthi Ramakrishnan in Bengaluru; Editing by Shounak Dasgupta)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- AT&T (T) Agrees to Acquire Time Warner (TWX) for More than $80 Billion - WSJ
- Stifel Upgrades PayPal (PYPL) to Buy Following 'Solid' Q3 Results
- Maxim Integrated (MXIM) PT Bumped to $45 at Jefferies Following In-Line Results on Note 7 Impact
Create E-mail Alert Related CategoriesAnalyst Comments, Litigation, Reuters
Related EntitiesDefinitive Agreement, Tim Ramey
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!