Tariffs soften shares

Tyson posts 8 percent drop in past month; other food firms fall.

The share prices of several food companies, such as Kraft, Hormel, Pilgrim’s Pride and Tyson Foods, have fallen recently as trade partners impose tariffs on U.S. goods in retaliation for the Trump administration’s moves to increase tariffs on a litany of products, analysts said.

In the past few days multiple investment firms have lowered their stakes in Tyson Foods Inc., according to various analytics companies that watch market activity.

Ken Shea, a senior food and beverage analyst at Bloomberg Intelligence, said the international trade climate is likely to blame.

“A lot of the meat producers are doing particularly poorly, probably as a result of the trade uncertainties, which include the soybean prices, which would lower meat costs. It’s that kind of thought,” Shea said. “A lot of these stocks have done well prior.”

Tyson shares have steadily declined since January, down from a 52-week high of $84.65. Shea said Tyson’s shares fell about 8 percent in the past month. They dipped 30 cents Tuesday to close at $65.56.

Shares of competitors Sanderson Farms and Pilgrim’s Pride have also lost their footing on the New York Stock Exchange this year. Sanderson shares traded at a 52-week high of

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$176.43 and closed Tuesday at $99.50. Pilgrim’s shares traded at a 52-week high of $38.39 and closed Tuesday at $18.80.

In a telephone interview Tuesday, Shea pointed to Goldman Sachs research published Friday about what analysts are expecting from meat companies in the near future. In the report, Goldman downgraded its rating of Sanderson Farms over an executive’s “guarded” response when pressed about whether the company expected softer meat prices this summer amid trade uncertainties.

Shea said “Tyson seems to be faring better than others,” and Bloomberg Intelligence’s street estimates show a 20 percent jump in Tyson’s earnings per share. The company is scheduled to release its quarterly earnings report on Aug. 6. As the Springdale company faces headwinds from increased labor and freight costs, he bet that Tyson will continue to benefit from the acquisition of AdvancePierre and the lower tax rate signed into law in December.

“This doesn’t take away from the fact that these markets are inherently volatile,” Shea said. “And I think most investors understand that.”

After China’s tariffs on U.S. soybeans and pork, Farha Aslam, a Stephens Inc. analyst who follows Tyson, recently lowered her estimates for Tyson’s fiscal 2019. In a research brief published Thursday, she wrote that Tyson shares the past 52 weeks have traded

at a five-year low of $58.85, “reflecting the uncertainty regarding the company’s ability to grow earnings in [fiscal 2019].”

Amid questions in the market, Aslam kept her estimate of Tyson’s fiscal 2018 earnings per share at $6.60, but lowered estimates for fiscal 2019 to $7, down from $7.20. She attributed these changes to “lackluster demand” paired with increased production in Tyson’s pork and chicken segments.”

The past few months pork processor profits have fallen because of increased live hog costs and “pork demand disruptions caused by tariffs,” she wrote. Meanwhile, Tyson’s chicken demand has been stymied by competing meats in restaurant and retail markets.

— Ken Shea, Bloomberg Intelligence analyst “This doesn’t take away from the fact that these markets are inherently volatile. And I think most investors understand that.”