Cal-Maine Foods Reports Decline in Q3 Earnings Amid Market Challenges

Key Points

• Cal-Maine Foods reports a significant decrease in Q3 earnings but beats Wall Street estimates. The company faces challenges from falling egg prices and a bird flu outbreak. Analysts maintain a cautious outlook on the stock amid market pressures.

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Cal-Maine Foods Inc (CALM), the largest producer and distributor of fresh shell eggs in the U.S., has reported a significant decrease in its fiscal third-quarter earnings, despite surpassing Wall Street estimates. The company's earnings amounted to $146.7 million, or $3.00 per share, a sharp decline from the previous year's $323.2 million, or $6.62 per share. This downturn is attributed to a 29.5% fall in revenue, totaling $703.1 million, down from $997.5 million last year. The decrease in revenue and earnings is primarily due to a substantial drop in egg prices, with the net average selling price per dozen for conventional eggs falling by 41.5% year-over-year.

Despite these challenges, Cal-Maine managed to beat analysts' expectations, which had predicted earnings of around $2.46 per share. The company also announced a cash dividend of approximately $1.00 per share, payable in May 2024. However, the company faced a setback with the discovery of highly pathogenic bird flu at one of its Texas facilities, leading to the culling of approximately 1.6 million laying hens, or about 3.6% of its flock. This incident has temporarily halted production at the affected facility, following U.S. Department of Agriculture protocols.

Looking ahead, Cal-Maine faces continued pressure from supply and demand imbalances in the egg market, as noted by Goldman Sachs analysts who maintain a Sell rating on the stock. The company's stock has seen a modest increase of 2.5% over the past year, but the average price target suggests a potential downside. Despite these challenges, Cal-Maine's strong balance sheet and lower feed ingredient prices may provide some cushion against the volatile market conditions, positioning the company for potential growth and acquisitions in the future.