Tyson Foods Downgraded, Removed From J.P. Morgan Focus List

• Shares of Tyson Foods, Inc. TSN have surged 22.74 percent in the last six months, hitting a high of $47.44 on October 23.
• J.P. Morgan’s Ken Goldman has downgraded the rating on the company from Overweight to Neutral, with a price target of $47.
• While removing the stock from J.P. Morgan’s Analyst Focus List, Goldman mentioned that the strength in the share price suggests that there would be limited near term upside.

Analyst Ken Goldman mentioned that while “generally constructive on fundamentals; however, with negative data in protein starting to pile up we view the risk/reward for TSN as reasonably balanced.”

Goldman also mentioned that there were several positive factors still working in favor of Tyson Foods, such as strong margins across the beef and pork packing industry, the resilience of the company’s earnings to chicken breast price fluctuations, “the potential for Tyson to shift the reporting of value-added chicken into its Prepared Foods segment,” and a year on year decline in egg sets.

However, with the 13 percent increase in Tyson Foods’ share price since September 30, as compared to the 10 percent increase in the SPX, Goldman expressed concern that “valuations across the board are getting a bit inflated at this point.”

The EPS estimates for 4Q15, FY16 and FY17 have been lowered “to reflect the slightly worse current chicken environment than we previously modeled and recent changes in futures pries.”