Shares of Tyson Foods Inc. (NYSE:TSN) fell as much as 11.5% early Thursday and then partially recovered to close down around 9%, after a negative analyst note on the food industry specialist's pricing practices.
More specifically, Pivotal Research Group's Tim Ramey lowered his rating on Tyson Foods from "buy" to "sell" and simultaneously reduced his per-share price target from $100 to $40.
To justify his new bearish stance, Ramey pointed to a "powerfully convincing" class action lawsuit filed early last month alleging that Tyson had colluded with several other companies in the broiler chicken business to reduce production and increase prices since 2008.
Ramey added, "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."
That said, Tyson Foods also took a surprising step today, issuing a press release to rebut Ramey's call by stating:
An analyst report has been issued this morning commenting on pending antitrust litigation which was filed over a month ago. While we don't normally make substantive comments regarding pending litigation, we dispute the allegations in the complaints as well as the speculative conclusions reached by the analyst, and we will defend ourselves in court. Contrary to what the analyst assumed, we have not made any changes to our business practices in response to the complaints.
To be fair, Tyson Foods is innocent until proven guilty. And apart from highlighting Ramey's vote of confidence in the merit of the suit, today's downgrade didn't add any new information that hadn't already been brought to light since the suit was filed. For now, I think investors should continue to focus first on Tyson Foods' actual business.