LITTLE ROCK — Shares of Tyson Foods Inc. of Springdale hit a 52-week low of $15.22 on Tuesday as heat and prolonged drought have driven up production costs for corn and other agricultural feedstocks.
The stock, which closed at $15.45 — down 18 cents, or 1.2 percent — had traded before Tuesday in a range of $15.60 and $21.06 in the past year on the New York Stock Exchange.
Bank of America Merrill Lynch analysts last week downgraded shares of Tyson and Smithfield Foods Inc. of Smithfield, Va., from buy to underperform, citing the rise of corn prices to near record levels.
The U.S. Department of Agriculture this week rated corn and soybean crops as the worst since 1998.
“It’s unfortunate for Tyson because, just as beef margins have recovered, chicken margins are about to head south thanks to feed,” Ken Goldman, an analyst with JPMorgan, said in a research note. “With industry fresh pork margins still soft, two of Tyson’s three major commodity businesses are about to perform at a below-average level, by our read.”
His firm downgraded Tyson’s stock to neutral from overweight.
“Although we continue to believe that Tyson deserves a slight premium multiple to the ag/protein group, we no longer can support our previous forecast of $2.50 ‘normalized’ EPS [earnings per share],” Goldman said. He lowered its forecast to $1.83, citing the likelihood of a third straight year of poor corn yields.
Gary Mickelson, a Tyson spokesman, said the company does not comment on its stock price.
Corn for September delivery has traded above $7.80 a bushel this week. Corn prices have soared approximately 50 percent since mid-June on the Chicago Board of Trade.
Laurel, Miss.-based Sanderson Farms Inc., the thirdlargest U.S. poultry producer, told Bloomberg News that every 10-cent increase in corn prices boosts the company’s costs by $2.21 million.
AccuWeather.com said Tuesday in an e-mailed statement that corn yields may drop to 138 bushels an acre. The U.S. Department of Agriculture projected 146 bushels in mid-July, down from its estimate of a record 166 bushels in June.
Farha Aslam, a New Yorkbased analyst for Stephens Inc., said in a recent research note to investors that Tyson is likely to increase repurchases of the company’s stock.
She said the company’s chicken business is benefiting from “very good execution and cost control” and that the supply of cattle is likely to be ample until the middle of the company’s fourth quarter.
On Monday, market research and ratings firm CLSA downgraded Tyson’s stock from a buy rating to underperform.
And BMO Capital Markets lowered its rating from outperform to market perform. Zacks reiterated a neutral rating with a $19 target price.
Information for this article was contributed by Patrick McKiernan, Whitney McFerron, Tony C. Dreibus and Elizabeth Campbell of Bloomberg News.
Business, Pages 25 on 07/18/2012