Chicken or Egg? Does Tyson Have More Upside Than Cal-Maine Stock?

Key Points

• Tyson Foods stock has fallen 5.4%, while Cal-Maine stock surged 31% in the last month.
• Tyson Foods is hurting from losses in beef, but chicken is leading the profits.
• Cal-Maine saw specialty egg volumes and prices surge revenue by 71% YoY, requiring the need to bolster production facilities and acquire from third-party growers.

Which came first: the chicken or the egg? This age-old question can be posed to investors when choosing between the two premiere stocks for each product, chicken and eggs. One would think the stocks of leading chicken and egg producers would be moving together, but the reality is the opposite.

The nation's largest beef and chicken producer, Tyson Foods Inc. NYSE: TSN stock, has recently fallen with a one-month loss of 5.4% and is just starting to get its sea legs as shares are up 9.4% year-to-date (YTD). The nation's largest egg producer, Cal-Maine Foods Inc. NASDAQ: CALM, has been scoring a string of new highs as its one-month gain is 31% and is trading up 57.6% YTD.  

Both stocks operate in the basic materials sector and agricultural industries and are an essential part of people’s diets, but have had sharply opposite stock trajectories. Let’s take a look at both stocks to gauge which has more upside from here.

Tyson Foods: Leading Beef and Poultry Producer 

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While Tyson may be known for chicken products, it is the nation's largest beef producer under brands including Hillshire Farm, Jimmy Dean, Wright, State Fair, ibp, Aidells and Tyson. Its third quarter of 2024 saw revenues climb 1.6% YoY to $13.35 billion, beating $13.21 billion consensus estimates. Its reported EPS of 87 cents, beating analyst estimates by a healthy 20 cents.

Its beef business generated the most revenue at $5.24 billion, up 1.4% YoY, with volume rising 4.4% YoY. Pork generated the most growth at 12.6% YoY, generating $1.46 billion in revenue. Chicken generated the second-highest revenue at $4.07 billion but fell 3.7% YoY. Chicken volume fell 0.4% YoY, which was an improvement from the 6% YoY decline in the previous quarter. However, chicken was the most profitable, generating $244 million in GAAP profit versus GAAP losses of $69 million for beef and $62 million for pork. Chicken also improved the most profit-wise compared to GAAP losses of $314 million in the year-ago period.

Beef Leads Losses as Chicken Leads the Projected Gains in Fiscal 2024

The United States Department of Agriculture (USDA) indicates domestic production of protein, including beef, pork and chicken, should increase slightly over 2023 levels. Tyson expects beef production will fall 2% YoY with an adjusted operating loss between $400 million to $300 million in fiscal 2024. Pork is expected to see a 3% rise in domestic production, generating $100 million to $200 million in adjusted operating income in fiscal 2024. Chicken is the star, with flat production in 2024 but an adjusted operating income of $850 million to $950 million in 2024.

Chicken Consumption is on the Rise

Tyson's beef segment is the source of its problems as it leads the losses. Chicken is on the uptrend, as the average American consumed an all-time high of 101.1 pounds of chicken in 2023, according to the National Chicken Council. This figure is expected to rise again to a new record of 103.2 pounds in 2024 and 103.8 pounds in 2025. For Tyson, chicken is the thoroughbred for profits and margins. Investors are hoping beef will turn around while chicken growth lasts. Tyson is committed to reducing costs and capex.

The Fed raised interest rates by 50 bps in September due to falling inflation moving closer to the 2% target, but the September CPI report indicates a 0.2% month-over-month increase and a 2.4% YoY increase. Food inflation rose 2.3% YoY, while food away from home rose 3.9% YoY.

Tyson Sets the Bar Low for a Potential Upside Beat

Tyson stock has a forward price-earnings (PE) of 20.86, trading at 7.97X price-cash flow with an annual dividend yield of 3.33%. The consensus analyst price target is $59.00 based on 9 analysts’ twelve-month price targets, with $78.00 as the highest analyst price target. However, only one analyst has a Buy rating, which 6 analysts have a Hold rating, and 1 analyst has a Sell rating on the stock. Sales finally ticked up 1.6% after declining YoY in its previous three quarters. Tyson also may have low-balled revenue guidance as consumers cook more meals at home. Tyson revised its full year adjusted operating income guidance higher from the lower range to $1.6 billion to $1.8 billion, up from $1.4 billion to $1.8 billion previous guidance.

Cal-Maine: Nation’s Large Egg Producer

The Fed cut interest rates by 50 bps in September due to falling inflation moving closer to the 2% target, but the September CPI report indicates a 0.2% month-over-month increase and a 2.4% YoY increase. Food inflation rose 2.3% YoY, while food away from home rose 3.9% YoY. The largest jump in food inflation components included butter up 7.8%, uncooked beef up 4.7%, and eggs surging 39.6% YoY due to bird flu challenges.

Cal-Maine is the country’s largest egg distributor, operating under well-known brands, including Egg-Land's Best, Land O'Lakes, Farmhouse Eggs, 4-Grain, Sunny Meadow and Sunups. The company manages the entire production cycle to packaging, distribution and marketing.

Decreases in the egg supply stemming from highly pathogenic avian influenza (HPAI) forced Cal-Maine to acquire eggs from third-party growers and farms. During fiscal third and fourth quarters, HPAI outbreaks caused them to depopulate 3.1 million laying hens and 577,000 pullets, which are young female hens under one-year-old that have yet to lay an egg.

Cal-Maine Missed EPS Guidance But Crushed Revenues

In its fiscal first quarter of 2025, Cal-Maine reported earnings of $3.06, missing consensus estimates by 30 cents. Revenue soared by 71.1% YoY to $785.9 million, crushing $704.65 million consensus estimates. Demand for specialty shell eggs surged in the quarter generating higher volume and market prices. Farm production costs fell 11.7% YoY, helping expand margins.

Bolstering Special Egg Production Capacity in 2025

Cal-Maine is doubling down on the cage-free egg trend. On Oct. 4, 2024, the company also announced the approval of $40 million in new capital projects to expand the cage-free production capabilities further. It will include five new cage-free layer houses across its locations in Georgia, Florida, Texas and Utah. Construction is set to begin at the end of 2024 and is expected to boost cage-free hen capacity by 1 million cage-free layer hens by the summer of 2025. Tyson is also contracting local growers for commitments of up to 1.2 million additional free-range hens by the fall of 2025 and plans to add more capacity in the future.

Cal-Maine Stock May Be Overvalued

While the upside stock gains are impressive, it may have gone up too far and too fast, trading at $90. On Sept. 17, 2024, Goldman Sachs raised its EPS estimates to $3.53 per share versus $2.79 per share due to the surge in egg prices. Goldman also raised its price target to $55, up from $53 and maintained its Sell rating based on valuation.

The consensus analyst price target sits 26% lower at $67.00 per share. The highest analyst price target is at $82.00 based on 2 analyst ratings, of which 1 has a Hold, and 1 has a Sell rating (Goldman Sachs).

Based on analyst consensus prices, Tyson Foods stock has more upside left in its price, while Cal-Maine Foods may be drastically overvalued based on analyst ratings and targets.