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Tyson shares hit by investigation into the poultry market

Tyson Food, the largest producer of poultry in the US, lagged behind the S&P 500 on Monday after it disclosed that the office of Florida’s attorney-general is investigating potential anti-competitive behaviour in the chicken market.

Tyson’s stock price fell 5.7 per cent to $59.70 on Monday morning — its lowest level since December 2016. Guidance for revenue derived from chickens was reduced, hitting Tyson’s stock price, said Farha Aslam, an analyst at Stephen’s, with increases to guidance for beef and pork unable to stem declines.

The company has already received a subpoena from the Securities and Exchange Commission and been named in lawsuits that allege the industry has for years colluded to drive the price of chickens higher by holding production lower. The allegations are denied by Tyson.

In a filing with the SEC, Tyson revealed that the civil investigative demand is related to the Georgia Dock chicken products pricing index formerly published by the Georgia Department of Agriculture.

“There is going to be a lot of regulatory scrutiny on this,” said Timothy Ramey, an analyst at Pivotal Research Group.

Tyson reported the Florida AG investigation after announcing earnings that missed analysts’ estimates. The company reported adjusted earnings per share of $1.01, below the $1.02 estimated by analysts and down from $1.07 a year earlier.

Mr Ramey said the company is likely going to come under further pressure over the course of the year as production of chickens — known as broilers, referring to chickens under 13 weeks old which make up the bulk of the market — begins to rise.

The US Department of Agriculture estimates broiler production of 41.5bn pounds over the course of 2017, compared with 40.7bn in 2016. Measured in actual numbers of chickens, production has risen from 8.9bn in 2013 to 9.2bn in 2016.

“There is a whole lot more product slamming into the market and it is really tough to maintain margins in the face of greater supply,” said Mr Ramey.

Elsewhere, Newell Brands, owner of food container maker Rubbermaid, saw its share price rise 11.6 per cent to $51.78 off the back of positive earnings.

The company reported adjusted earnings per share of 34 cents, down from 40 cents for the same period last year but still beating analysts’ estimates of 29 cents per share.

Apple rose to an all-time high on Monday morning, up 2.9 per cent to $153.25. The move came as Drexel Hamilton raised its target price for the stock to $202 per share, valuing the company at over $1tn.

Brian White at Drexel Hamilton said that following the first-ever drop in iPhone sales in 2016, the market became “overly negative” on Apple, which currently has just 14.6 per cent of the global smartphone market share, according to IDC data. That leaves it plenty of room for growth.

The broader S&P 500 index dipped 0.1 per cent entering the New York afternoon to 2,396. The Nasdaq Composite was down 0.2 per cent to 6,090 and the Dow Jones Industrial Average was lower by 0.1 per cent at 20,992.

Additional reporting by Mamta Badkar.

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