SUNDAY, JUNE 4, 2017 Tyson’s 2Q pummeled shares

In early May, stock fell 8.6% in heavy trading, leveled off

Tyson Foods Inc. shares fell almost 9 percent in the weeks after the May 5 release of its second-quarter earnings report. The largest meat company in the nation reported a slight sales drop compared with the second quarter of 2016.

In the span of five days, Tyson shares fell from $63.33 to $57.88, or about 8.6 percent, and held steady for the rest of the month, according to the New York Stock Exchange. The shares closed Thursday at $58.48.

Ken Shea, senior food and beverage analyst at Bloomberg, pointed to the earnings report as a possible catalyst for the company’s recent stock activity. Also, Shea said, short-term investors could have been disappointed by this quarter’s earnings per share compared with the first quarter’s results.

In December 2016, analysts estimated Tyson’s firstquarter earnings at $1.26 per share, but the company’s actual earnings were 25 percent higher, or $1.59 per share. For the second quarter of 2017, the company missed analysts’ expectations by 1 cent per share, and the stock market reacted to it.

More than 10 million Tyson shares were traded on May 8. Average daily volume for the stock is about 3 million.

Bob Williams, senior vice president and managing director of Simmons First investment Group, described Tyson’s stock as being a “bit volatile.”

“Wall Street is about managing expectations,” Williams said. “The Street can react negatively to a negative earnings surprise and punish a company’s stock price severely.”

In its second-quarter earnings report, Tyson cited a slight sales drop (less than 1 percent) compared with the 2016 second quarter. Operating and net income numbers dropped about 20 percent for the second quarter compared

with the year-ago period. But in the first two quarters of fiscal 2017, the operating and net income results are 5 percent higher compared with the first half of fiscal 2016.

Shea said publicly traded companies such as Tyson have a complicated supply chain and are subject to more exposure to market factors.

While Tyson’s stock is off recent highs, the company’s overall “earnings progress has been pretty strong,” he said.

Several factors influenced Tyson’s operational and financial performances in the second quarter, including: fires at two chicken plants, which led to decreased chicken sales; the acquisition of Advance-Pierre Foods Holdings Inc. and assuming $1.1 billion of its debt; and continued challenges with pizza toppings and meat ingredients for its prepared foods segments, according to the company’s quarterly report.

“Had it not been for the fires, our Chicken segment return on sales would have been within its normalized range,” Tom Hayes, president and chief executive officer of Tyson Foods, said in the second-quarter earnings report.

Tyson declined to comment on the performance of its stock.

Another factor responsible for Tyson’s stock drop could have been recent news about alleged price-fixing of chicken products, Shea said.

On Feb. 6, Tyson disclosed a subpoena it had received from the U.S. Securities and Exchange Commission pertaining to allegations it conspired with rivals to fix chicken prices.

“It’s hard to say how much is being reflected in the [stock] price,” Shea said. “There could be investor skittishness whenever those things are reported. It’s hard to quantify.”

Tyson announced Thursday that it received notice of an unsolicited mini-tender offer — or an offer to acquire a company’s shares directly from current investors in an amount less than 5 percent of the issued stock — by TRC Capital Corp. to purchase up to 2 million shares of Tyson Class A common stock. TRC Capital’s offer price of $55.75 per share is roughly 4.4 percent lower than the $58.34 closing price for May 26 — the last trading day before the date of the offer.

According to a news release, Tyson Foods recommended that stockholders not tender their shares in response to TRC Capital’s offer. Tyson is not affiliated or associated with TRC Capital, the mini-tender offer, or the offer documentation, the release said.