000304 IBP Shares Drop 10% As Food Stocks Slide

Chicago - Shares in No. 1 U.S. meat processor IBP Inc. dropped 10% on March 2, leading a lengthy list of U.S. food companies losing ground as technology stocks sizzled.

IBP "had run up the day before," said David Nelson, food industry analyst with Credit Suisse First Boston. "There is just a little volatility in this name right now. I don't know of any fundamental news" that would cause Thursday's drop.

"I think every food stock I (follow) is down today, so part of it is the overall group," Nelson added.

In morning New York Stock Exchange trading, shares in Dakota Dunes, S.D.- based IBP were off 1-5/16 at 12-3/8, after notching a 52-week low of 12-1/8 earlier in the session.

Among the other food companies trading lower were chocolate company Hershey Foods Corp., which was down 1-6/16 at 43-7/16, Bestfoods, the maker of Knorr soups and Hellmann's mayonnaise, which was off 1-13/16 at 39-9/16, and cereal and beverage maker Quaker Oats Co., which was down 1-15/16 at 51-3/4.

U.S. food companies have been hit hard in the last year as investors turn away from the mature industry in favor of the faster growth prospects and staggering stock gains in the technology sector.

The Standard & Poor's Foods Index was off more than 2% on Thursday while the broader S&P 500 was up fractionally. Four of the 13 companies comprising the Foods Index set 52-week lows on Thursday, including consumer products giant Sara Lee Corp., off 7/16th at 14-3/16 and chewing gum maker Wm. Wrigley Jr. Co., down 2 at 63-11/16.

"If you look at my screen today, I don't see anything but red," said Nomi Ghez, food industry analyst with Goldman Sachs. "It's again a day where you have the new world and old world battling, and (food stocks) are old world."

Nelson and Ghez said IBP has reported strong earnings in recent quarters, but investors have worried that smaller cattle and hog herds in 2000 could lead to higher costs and squeeze profit margins.

"Their earnings have been wonderful," Ghez said. "I think there is just a constant fear that this year's earnings will be down, but we knew that all along."

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com