The Zacks Analyst Blog Highlights: Tyson Foods, Sanderson Farms, Hormel Foods, Bank of America and Wells Fargo

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Apr 02, 2014, 09:30 ET

CHICAGO, April 2, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Tyson Foods Inc. (NYSE:TSN-Free Report), Sanderson Farms Inc. (Nasdaq:SFM-Free Report), Hormel Foods Corp. (NYSE:HRL-Free Report), Bank of America Corporation (NYSE:BAC-Free Report) and Wells Fargo & Company (NYSE:WFC-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Court Stands by Strict Meat Product Labels

The meat industry, which has already been affected by federal budget cuts, is seeing more changes in the form of U.S. Department of Agriculture's (USDA) 'Country of Origin Labels' (COOL). Per media reports, meat producers' attempts to suspend the newly modified COOL were nullified by a U.S. Court of Appeal. The Judge stated that the law helped consumers make informative choices about the products they bought.

The law on meat labeling requires processed meat packs to provide details about the geographical origin of the meat.

The ruling is an extension of the already existing custom of labeling the Country-of-Origin of the meat sold at retail outlets. The meat packets containing muscle cuts, such as steaks and pork chops, which were to date being labeled simply as a product of one or more countries, would have to be more specific. Meat producers will now have to add information regarding where the animal was born, raised and slaughtered.

Moreover, the ruling requires that all the meat in a packet should come from one source. Mingling of meat from different sources will be allowed for ground meat only.

The new verdict is in response to a World Trade Organization (WTO) ruling passed in 2012, which required the U.S. government to modify the labeling rule by May 23, 2013. The Country of Origin Labels were made mandatory by the U.S. government in 2009.

The stricter Country of Origin Label will provide the U.S. products with a competitive advantage over foreign products. U.S. consumers, if offered a clear choice, prefer fresh foods of domestic origin, thereby strengthening demand and prices. The stricter labels will increase meat consumption as consumers will be free from concerns such as the danger of contracting Mad Cow Disease or Bovine Spongiform Encephalopathy, which was first diagnosed in Canadian dairy herds in 2003.

However, the new rule is opposed by meat processors like Tyson Foods Inc. (NYSE:TSN-Free Report), Sanderson Farms Inc. (Nasdaq:SFM-Free Report) and Hormel Foods Corp. (NYSE:HRL-Free Report) led by the American Meat Institute. According to these companies, the new rule forces the segregation of animals and thereby, raises costs.

BofA Faces Another Legal Hassle

A lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Bank of America Corporation (BAC-Free Report) was recommended to be continued by a U.S. Magistrate Judge David Cayer. The news was confirmed on Monday in a Reuters report.

It was alleged that BofA sold faulty residential mortgage backed securities (RMBS) worth more than $855 million in the pre-crisis period. The company misled investors by compromising on the quality of 1191 loans that backed these securities.

Among the investors who purchased these loans, were Wachovia Bank National Association, which was later acquired by Wells Fargo & Company (NYSE:WFC-Free Report), and the Federal Home Loan Bank of San Francisco.

In Aug 2013, the Department of Justice (DOJ) and the SEC filed two separate civil lawsuits against BofA pertaining to the aforementioned RMBS sale. Last Thursday, Judge Cayer hinted at the dismissal of the lawsuit filed by the DOJ. However, charges slapped by the SEC under the Securities Act of 1933 were upheld as the Judge found evidence that reflected violation of the Act.

Judge Cayer maintained that BofA concealed as well as misinterpreted facts and information related to the RMBS. The company, in its disclosures to the investors, had also manipulated the proportion of loans that went through third-party brokers to 42% from the actual figure of 70%

Nevertheless, the recommendations made by Judge Cayer will be reviewed by U.S. District Judge Max Cogburn in Charlotte.

Litigations related to the sale of risky mortgage loans have weighed heavily against the profitability of the Wall Street biggies like BofA. Since 2010, the company has shelled out more than $50 billion to settle mortgage related issues.

The stringent regulations seem to constraint the earnings of the companies, thereby resulting in losses for shareholders. However, these regulations ensure a more sustainable and secure investment environment over the long term.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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