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Buyers beware: Wal-Mart, Tyson shareholders watch stock drop; analysts say, 'don't worry.' (Wal-Mart Stores Inc.; Tyson Foods Inc.)

SOME ANALYSTS HAVE simple advice for stockholders in Wal-Mart Stores Inc. and Tyson Foods Inc.: Calm down.

Wal-Mart stock, which split 2-for-1 in February, went from a high of around $34 per share in early March to a low of $27 in April.

Tyson peaked near $26 per share in March and bottomed out at $21 in April.

As stockholders fretted about what was happening, questions arose about the potential impact the stock drops might have on northwest Arkansas, where the two Fortune 500 companies are located.

But local analysts say the varied movements of recent weeks are not unique to Wal-Mart and Tyson.

"Skittish" and "nervous" is how today's uncertain market is being described.

Everything from the Family and Medical Leave Act -- signed into law by President Clinton on Feb. 5 and slated to become effective in August -- to a possible increase in minimum wage is having an effect on the market.

"Right now the market is so shaky, people are looking for any reason to sell," one stock analyst says.

There are additional reasons to explain the dramatic drops Wal-Mart and Tyson have seen.

First, the devastating winter snow-storm in the East and Northeast hurt sales at Wal-Mart, the nation's leading retailer.

Following that, Prudential Securities Inc. of New York trimmed its earnings estimates for first quarter fiscal '94.

That made for a snowball effect, literally and figuratively.

Much was made of Prudential's announcement in newspapers such as The Wall Street Journal. That alerted buyers, and a small panic ensued as the stock tumbled.

Analysts were not concerned, though. One even says, "Smart traders know what's happening and don't move."

Other analysts' predictions had a similar effect on Tyson stock.

The Media's Role

Merrill Lynch Pierce Fenner & Smith Inc. of New York put an above-average rating on Tyson stock Feb. 24. The stock price began to climb. But it may have run up too fast because on March 11, Prudential announced a hold recommendation.

This is where the theory of "buy on weakness, sell on strength" comes into play. When the stock runs so high, as Tyson's did in late February, it is a good time to sell. Then, when the stock pulls back, the buying starts over.

The media plays a significant role in a stock's value.

News articles have been noting that brand-name companies are suffering at the hands of private-label companies. Stock at brand-name companies has been dumped quickly in recent weeks.

Tyson may have been hurt here. Yet, with 22 percent of the U.S. poultry market, Tyson has no close rival among the private-label companies.

There are also what one analyst calls wild cards that may have an effect on stock.

For instance, there was information in late March about a possible radiation treatment for eliminating salmonella from chicken, a procedure that has faced substantial opposition.

That could have driven down the price.

Just when it looked like Wal-Mart's stock might be stabilizing last week near $28 per share, the following news further drove down the stock price: The company reiterated that it would be happy with a 7-8 percent increase in same-store sales for April and through the rest of the year.

It had a 3 percent increase in same-store sales in March, and a 5 percent increase for February and March combined. Wal-Mart usually registers same-store sales increases in the double digits.

As a result, sellers far outnumbered buyers of Wal-Mart stock, and trading of Wal-Mart even had to be temporarily halted at one point, for 45 minutes on April 14, after a sudden $3 plunge.

Tyson might be faring better with a stock price that seems to have finally leveled. Last week, the stock hovered near $21 per share.

Although Wal-Mart is still seeing some tumultuous times, the stock is at least settling with Tyson, and shareholders may finally calm down, too.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Rengers, Carrie
Publication:Arkansas Business
Date:Apr 19, 1993
Words:642
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