Bearish Sell-Side Analyst On Tyson Foods Earnings

Investors of Tyson Foods, Inc. TSN have got a lot on their plate with the company’s below par earnings, weak FY 2017 guidance and CEO Donnie Smith stepping down in a mere 40 days.

Quarter, In Review

Following are the key highlights from Tyson’s quarterly results:

• Tyson Foods fourth quarter adjusted EPS was $0.96, lower than the Street consensus of $1.17.
• Tyson’s FY 2017 guidance was set at $4.70–$4.85, below the Street consensus of $4.96.
• Smith steps down December 31, to be replaced by president Tom Hayes.

Tyson shares were hammered as the Street was mainly disappointed with the CEO departure in this difficult scenario. Notably, Smith has helmed the company since 2009 and is widely respected among his industry colleagues.

“With the issues we have discussed on chicken pricing, price fixing allegations, and a tumultuous 4Q16, we are not at all happy to see Mr. Smith step down,” Pivotal’s Timothy Ramey wrote in a note.

Additional Headwinds

Meanwhile, the shares were in the red since a Washington Post report said prices provided by eight anonymous chicken companies in the state used for calculating the Georgia price estimate (called the Georgia Dock) may not have given accurate information. The claims broached the possibility of artificial chicken price inflation and colluding.

“A CEO change at this inopportune time, taken with the fact that the company refused to take my questions on the call make us hyper-attuned to ‘intangibles.’ It is usually a very bearish sign for a company to fight with its detractors or part with its best CEO ever,” Ramey continued.

Ramey reiterated his Sell rating and $40 target price. Ramey downgraded Tyson to Sell in early October citing sustainability of the company’s chicken margins.

At last check, shares of Tyson Foods had plunged 14 percent to $57.72.