Cal-Maine Earnings Soared After Egg Prices Doubled

  • Scott Peters
  • Dec 29, 2022
  • Egg producers are shifting to cage-free production as more state governments mandate the requirement.

    Cal-Maine Foods Inc plunged after the egg producer's quarterly results were below analysts' expectations, despite a sharp jump in revenue. 

    The company has been struggling with egg production after the recent outbreak of avian flu and the egg company said there were no positive tests for avian flu at its manufacturing facilities. 

    The USDA division of Animal and Plant Health Inspection Service reported on December 27, 2022, that approximately 43.3 million commercial layer hens and 1.0 million pullets have been "depopulated" due to HPAI or avian flu this year. 

    Revenue in the fiscal second quarter ending in November soared 110% to $801.7 million from a year ago after egg prices soared. 

    Net income in the quarter rose to $198.6 million from $1.2 million and diluted earnings per share increased to $4.07 from 2 cents a share a year ago. 

    Average selling price of a dozen-eggs box increased to $2.70 from $1.36 a year ago, reflecting a surge in feed cost to 68.5 cents from 52.9 cents per dozen eggs. 

     

    Shift to Cage-free Eggs 

    In the fiscal second quarter 2023, total dozens sold increased 5.4% to 284.1 million from 269.6 million in the year ago, driven by strong  sales volumes in the specialty eggs category. 

    Conventional egg volumes sold fell 2.2% from a year ago, while specialty egg volumes sold increased by 24.1%. 

    Specialty egg sales increase was positively impacted by the surge in conventional egg prices. 

    Conventional egg prices are higher than specialty egg prices for the third quarter in a row, an abnormal trend on a historical basis.  

    Specialty egg demand was further supported by the implementation of cage-free mandates in California and Massachusetts from January 1, 2022, and more retailers shifting to selling more cage-free products.

    More retailers are looking to sell only cage-free eggs from as early as 2026 and the company has made substantial investments to transform its facilities. 

    The sales of cage-free eggs represented  approximately 18.2% of shell egg revenues compared to 22.4% in the quarter a year ago and cage-free dozens sold increased 47.4% from a year ago. 

     

    Hen Shortage to Last In 2023 

    The U.S. layer hen flock inventory is not expected to rebound to 328 million, five-year average in February, till the end of 2023, according to LEAP Market Analytics data quoted in the earnings release. 

    Layer hen numbers reported by the USDA as of December 1, 2022, were 308 million, a decrease of 5.8% compared with the layer hen inventory a year ago. 

    However, the USDA also reported that the hatch from July 2022 through November 2022 increased 5.8% as compared with the prior-year period.

     

    Dividend Declaration  

    For the fiscal second quarter, the company declared a dividend of $1.35 a share to stockholders on record of Jan 25, 2023 and payable on February 9, 2023. 

     

    Stock Price 

    Cal-Maine dropped 14.5% to $53.35 after the release of earnings but the stock has surged 41% in 2022 and advanced 20.5% in the last five years of trading. 

     

    The Company believes the HPAI outbreak will continue to exert downward pressure on the overall supply of eggs, and the duration of these effects will  depend in part on the timing of replenishment of the U.S. layer hen flock.


Annual Returns

Company Ticker 2023 2022 2021
Cal Maine Foods Inc CALM -6% 58% -1%

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