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Shares of Tyson Foods (TSN - Free Report) , the largest processor of meat in the U.S., fell about 8.9% Friday after a brokerage firm said that a class action lawsuit against the company over price manipulation was “powerfully convincing.”
The lawsuit claims that Tyson, Koch Foods, and several other major players in the chicken processing business colluded to reduce production over the past several years. Other companies implicated in the lawsuit, including Pilgrim’s Pride (PPC - Free Report) and Sanderson Farms were also down on Friday.
Today’s price action comes as Pivotal Research Group downgraded Tyson stock to “sell” from “buy” and cut its price target to $40 from $100. The bearish shift comes as the firm claims that the class action lawsuit may just be a serious problem for Tyson.
“Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector,” said Pivotal Research analyst Timothy Ramey.
Ramey continued by attempting to connect some of the dots of the case:
“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,” he said.
Over the past several years, public perception of the food production industry has certainly taken a turn for the worst, and we’re seeing many customers move away from giants like Tyson Foods in favor of organic meats.
Will this lawsuit add to this trend? Only time will tell, but it certainly doesn’t look like a great PR situation for any of the companies involved right now.
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Here's Why Tyson Foods (TSN) Stock Fell Today
Shares of Tyson Foods (TSN - Free Report) , the largest processor of meat in the U.S., fell about 8.9% Friday after a brokerage firm said that a class action lawsuit against the company over price manipulation was “powerfully convincing.”
The lawsuit claims that Tyson, Koch Foods, and several other major players in the chicken processing business colluded to reduce production over the past several years. Other companies implicated in the lawsuit, including Pilgrim’s Pride (PPC - Free Report) and Sanderson Farms were also down on Friday.
Today’s price action comes as Pivotal Research Group downgraded Tyson stock to “sell” from “buy” and cut its price target to $40 from $100. The bearish shift comes as the firm claims that the class action lawsuit may just be a serious problem for Tyson.
“Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector,” said Pivotal Research analyst Timothy Ramey.
Ramey continued by attempting to connect some of the dots of the case:
“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,” he said.
Over the past several years, public perception of the food production industry has certainly taken a turn for the worst, and we’re seeing many customers move away from giants like Tyson Foods in favor of organic meats.
Will this lawsuit add to this trend? Only time will tell, but it certainly doesn’t look like a great PR situation for any of the companies involved right now.
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly triped the market from 1988 through 2015 with a stellar average gain of +26% per year. See these high-potential stocks free >>