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Cal-Maine Foods, Inc. (NASDAQ:CALM) - A Steady Performer in the Egg Industry
Published on September 24, 2024 | Ticker: CALM

Cal-Maine Foods, Inc. (NASDAQ:CALM) is the largest producer and distributor of fresh shell eggs in the United States. The company's operations are fully integrated, spanning production, grading, packaging, marketing, and distribution of fresh shell eggs. With a total flock of approximately 42.2 million layers and 10.9 million pullets and breeders, Cal-Maine is the largest egg producer in the country.

Financials

In its latest fiscal year ended June 3, 2023, Cal-Maine reported annual net income of $758,024,000 and annual revenue of $3,146,217,000. The company generated strong annual operating cash flow of $863,010,000 and free cash flow of $726,441,000, showcasing its ability to consistently generate substantial cash from its operations.

For the third quarter of fiscal year 2024, which ended on March 2, 2024, Cal-Maine reported net sales of $703,076,000, a decrease of 7% compared to the same period in the prior year. The company's net income for the quarter was $146,712,000, or $3.01 per basic and $3.00 per diluted share, compared to net income of $323,219,000, or $6.64 per basic and $6.62 per diluted share, in the third quarter of fiscal 2023.

The decrease in net sales for the quarter was primarily due to lower conventional shell egg prices, which were partially offset by lower feed ingredient costs. The company's net average selling price per dozen for the third quarter of fiscal 2024 was $2.247, compared to $3.298 in the prior-year period. Conventional egg prices per dozen were $2.152, compared to $3.678 for the prior-year period, while specialty egg prices per dozen were $2.415, compared to $2.616 for the prior-year period.

Despite the decline in net sales, Cal-Maine's gross profit for the third quarter of fiscal 2024 was $218,572,000, compared to $463,026,000 in the same period of the prior year. The company's gross profit margin for the quarter was 31.1%, compared to 46.4% in the third quarter of fiscal 2023. The decrease in gross profit and margin was primarily due to the lower conventional egg prices, partially offset by the lower feed ingredient costs.

Operational Performance

On the operational front, Cal-Maine's total dozens sold increased 3.2% to 300.8 million dozen shell eggs for the third quarter of fiscal 2024, compared to 291.4 million dozen for the same period of fiscal 2023. For the year-to-date period, total dozens sold increased 1.3% from 850.8 million dozen to 862.0 million dozen. The company's volume of cage-free egg sales has continued to increase and account for a larger share of its product mix, representing approximately 27.9% of total net shell egg revenue for the third quarter of fiscal 2024.

Cal-Maine's farm production costs per dozen produced for the third quarter of fiscal 2024 decreased 10.5%, or $0.11, compared to the prior-year period, primarily due to lower feed costs. Feed costs per dozen produced decreased 19.9%, or $0.14, compared to the third quarter of fiscal 2023, primarily due to lower feed ingredient prices.

Liquidity

The company's liquidity position remains strong, with $367,123,000 in cash and cash equivalents and $327,720,000 in investment securities available-for-sale as of March 2, 2024. Cal-Maine's working capital was $1,001,903,000, and its current ratio was 5.7 at the end of the third quarter. The company has no long-term debt outstanding and has access to a $250 million revolving credit facility, which was undrawn as of March 2, 2024.

Geographic Diversification

In terms of geographic diversification, Cal-Maine operates primarily in the southwestern, southeastern, mid-western, and mid-Atlantic regions of the United States. The company's products are sold to a diverse group of customers, including national and regional grocery store chains, club stores, companies servicing independent supermarkets, food service distributors, and egg product consumers.

Outlook

Looking ahead, Cal-Maine has continued to invest in expanding its cage-free production capacity to meet the evolving needs of its customers. The company has several ongoing construction projects, including the addition of new cage-free layer and pullet houses, a feed mill, and renovations to a recently acquired facility in Dexter, Missouri. These investments are expected to further strengthen Cal-Maine's position in the growing cage-free egg market.

Risks and Challenges

Despite the challenges faced in the third quarter, such as the resurgence of highly pathogenic avian influenza (HPAI) affecting its operations, Cal-Maine remains a well-positioned player in the egg industry. The company's strong brand recognition, diversified customer base, and focus on operational efficiency have contributed to its consistent financial performance over the years.

Conclusion

As an analyst, I believe Cal-Maine's long-term prospects remain favorable, given the company's market-leading position, commitment to innovation, and ability to adapt to changing consumer preferences. While the short-term volatility in egg prices and the ongoing HPAI situation may continue to impact the company's financial results, Cal-Maine's solid financial position and strategic initiatives position it well to navigate these challenges and capitalize on the growing demand for specialty and cage-free eggs.

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