Cal-Maine Foods Inc. NASDAQ: CALM is the largest and leading producer and distributor of fresh shell eggs in the United States, with a 19% market share. Shareholders are rejoicing over its strong fiscal Q3 2024 earnings report and special $1.00 dividend. The company has staged a solid turnaround despite egg prices falling and the growing concerns over highly pathogenic avian influenza (HPAI).
Demand has remained stronger than ever, as reflected by its blockbuster earnings figures. Despite record volumes, the basic materials sector stock is still in value investing territory, with shares trading at just 11.15X earnings and 13.59X forward earnings. It competes with Post Holdings Inc. NYSE: POST as one of the largest food service suppliers of egg products.
Avian Flu Impacts
Concerns over avian flu (h5n1) have been making headlines, with farm livestock and cattle getting infected and even human infections becoming a reality. The USDA reported nearly 15.7 million commercial layer hens and pullets were depopulated (terminated) between November 2023 and January 2024. Cal-Maine experienced an outbreak in its Kansas facility, resulting in 1.5 million laying hens and 240,000 pullets being depopulated.
On April 2, 2024, the company reported positive test results for avian flu at its Parmer County, Texas facility, resulting in depopulating 1.6 million egg-laying hens (adult female chickens) and 337,000 pullets (less than 1 year-old female chickens) or 3.6% of its total flock. Production at the facility has been temporarily halted.
Cal-Maine was impacted by the significant egg supply reduction. With recent outbreaks causing market prices to spike, the overall impact is still considered to not be severe according to the company. Check out the sector heatmap on MarketBeat.
Growing Portfolio of Brands
The company has continued to acquire farms like Fassio Egg Farms and a closed broiler processing plant, hatchery and feed mill from Tyson Foods Inc. NYSE: TSN to help meet the strong demand. While you may not have seen Cal-Maine namesake brand eggs at your local grocer, you've more than likely purchased eggs under their portfolio of brands. They include Farmhouse, 4-Grain, Egg-Land's Best, Sunny Meadows and Land O'Lakes.
Daily Cup and Handle Breakout
The daily candlestick chart on CALM illustrates a cup and handle breakout pattern. The cup lip line formed on the double top at $58.31 on April 4, 2023. Shares sold off to a swing low of $42.16 on October 4, 2023, before staging a rally back towards the cup lip line, peaking at $57.83. CALM pulled back down to $52.91 on January 4, 2024, to set the stage for the handle formation as shares attempted twice to break the cup lip line, eventually reaching a new high peak at $64.76. The daily relative strength index (RSI) is testing the 70-band on its recent bounce. Pullback support levels are at $58.31, $55.11, $50.23 and $48.06.
Eggs-Citing EPS Beat and Special Dividend
On April 2, 2024, Cal-Maine reported an EPS of $3.00, beating consensus estimates for $2.45 by 55 cents. Revenues fell 29.5% YoY to $703.08 million, beating $692.35 million consensus estimates. The company will pay out a special $1.00 dividend to hold its Class A common stock, payable May 16, 2024, to holders of record as of May 1, 2024.
CEO Insights
Cal-Maine CEO Max Bowman noted that its fiscal Q3 2024 sales of $703.1 million were up against tough comps of $997.5 million in the year-ago period, which was the company's highest quarterly sales period with record high average selling prices for specialty and conventional eggs. The sales decline was a result of a significant drop in supplies due to the avian flu. Market prices have spiked as a result. Overall volume rose 3.2% to 300.9 million dozen.
Conventional eggs sold grew 2.6% to 192.2 million dozen, while specialty eggs rose 4.4% YoY to 108.6 million dozen sold. The net average selling price per dozen conventional eggs dropped 40% to $2.152 compared to $3.678 in the year-ago period. Specialty egg prices fell from $2.616 per dozen, down 36.1%, to $2.415 per dozen.
Bowman commented, "Demand for shell eggs has remained strong as consumers look for an affordable and nutritious protein option. Across our operations, we are focused on meeting this demand as we continue to identify opportunities to extend our market reach."
Bowman concluded, "We have a strong balance sheet that provides us with the flexibility to fund our growth initiatives, including potential acquisitions. We believe fiscal 2024 will be another successful year for the Company, and we look forward to the opportunities ahead for Cal-Maine Foods."
Cal-Maine analyst ratings and price targets are at MarketBeat. Cal-Maine's peers and competitor stocks can be found with the MarketBeat stock screener.
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