Accusations of collusion that have dogged the American chicken industry in recent months took a new turn after Tyson Foods, the country’s largest producer, said the Securities and Exchange Commission is investigating the allegations and sent the company a subpoena.
“We are cooperating with the investigation, which is at an early stage,” Springdale, Arkansas-based Tyson said Monday in its 10-Q filing. “Based upon the limited information we have, we believe the investigation is based upon the allegations” related to antitrust litigation involving broiler chickens, it said.
Tyson and its largest competitors have been named as defendants in a series of lawsuits that claim the industry colluded starting in 2008 to drive prices higher, allegations denied by Tyson and the other companies.
The Georgia Department of Agriculture, which gathered and disseminated the benchmark Georgia Dock prices that are the focus of some of the complaints, discontinued its widely used pricing index in December. Starting this month, the department began collecting data for a new index, although a lack of contributions has delayed the publication of the new measure.
Shares of Tyson, which also reported record quarterly earnings, fell as much as 3.3 percent in New York. Rival producers Sanderson Farms Inc. and Pilgrim’s Pride Corp. also dropped.
Despite the chicken controversy, Tyson’s business is booming. It reported net income of $1.59 a share for the three months through Dec. 31, up from $1.15 a year earlier and beating the $1.27 average of 12 estimates compiled by Bloomberg.
“We capitalized on favorable market conditions in our beef and pork segments and the cash generated is providing fuel for growth in our value-added chicken and prepared foods segments,” Chief Executive Officer Tom Hayes said on a conference call.
Earnings excluding one-time items will be $4.90 to $5.05 a share in the 12 months through September, it said in a separate statement. That compares with a December forecast of profit at $4.70 to $4.85.
The higher guidance is “primarily the result of this quarter’s far-stronger-than-expected margin performance,” David Palmer, a New York-based analyst for RBC Capital Markets who has a sector perform rating on the shares, said in a report on Monday. The increase “suggests some degree of over-earning this quarter relative to the remaining three quarters.”
Hayes said the company’s goal is for long-term earnings per share growth to be in high single digits as it invests back into its businesses. Tyson has in the past targeted growth above 10 percent, and in fiscal 2016, its adjusted earnings rose 39 percent.
The shares were 0.8 percent lower at $64.85 at 10:44 a.m. in New York.
(c) 2017, Bloomberg · Shruti Date Singh / (Photo by Paula Bronstein/Getty Images)
