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1. Company Snapshot

1.a. Company Description

Cal-Maine Foods, Inc., together with its subsidiaries, produces, grades, packages, markets, and distributes shell eggs.The company offers specialty shell eggs, such as nutritionally enhanced, cage free, organic, and brown eggs under the Egg-Land's Best, Land O' Lakes, Farmhouse Eggs, and 4-Grain brand names, as well as under private labels.It sells its products to various customers, including national and regional grocery store chains, club stores, independent supermarkets, foodservice distributors, and egg product consumers primarily in the southwestern, southeastern, mid-western, and mid-Atlantic regions of the United States.


Cal-Maine Foods, Inc.was founded in 1957 and is headquartered in Ridgeland, Mississippi.

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1.b. Last Insights on CALM

Cal-Maine Foods' recent performance was negatively impacted by its downbeat earnings release, which missed expectations despite strong egg sales. The company's volatile business, driven by fluctuating egg prices, has limited analyst coverage. Although Cal-Maine is shifting towards specialty eggs and prepared foods to achieve higher margins, its Q1 earnings report revealed a miss on both revenue and earnings. With a debt-free balance sheet and opportunities for M&A, the company is well-positioned for growth, but faces challenges from cyclical egg prices.

1.c. Company Highlights

2. Cal-Maine Foods' Strong Q1 Earnings Driven by Specialty Eggs and Prepared Foods

Cal-Maine Foods delivered its strongest first quarter in history, with net sales reaching $922.6 million, up 17.4% from last year. The company's shell egg sales increased by 6.5%, while specialty egg sales volume rose by 7.5%. Prepared foods sales surged by over 800% to $83.9 million, with Echo Lake Foods contributing $70.5 million. The company's gross profit improved by 26%, driven by higher shell egg selling prices, growth in specialty egg sales volume, lower feed costs, and contributions from prepared foods. Operating income was $249.2 million, up from $187 million last year, and net income was $199.3 million, or $4.12 per diluted share, significantly beating estimates of $2.17.

Publication Date: Oct -25

📋 Highlights
  • Historic First-Quarter Performance:: Net sales surged to $922.6M (+17.4% YoY), driven by 6.5% shell egg volume growth and 7.5% specialty egg volume increase.
  • Prepared Foods Surge:: Echo Lake Foods contributed $70.5M in sales, lifting prepared foods revenue to $83.9M (+800% YoY).
  • Strong Profitability:: Operating income rose to $249.2M (+33.3% YoY), net income hit $199.3M, and EPS reached $4.12 (+16.9% YoY).
  • Biosecurity Investment:: $80M+ spent since 2015 on biosecurity to combat avian flu, with 3.1M hens affected industry-wide.
  • Specialty Egg Growth:: Cage-free/pasture-raised eggs grew double-digits; annual capacity expansion targets 10% specialty segment growth.

Financial Performance and Guidance

The company's financial results were driven by its diversified portfolio, including conventional eggs, specialty eggs, and prepared foods. Cal-Maine's vertically integrated model and focus on operational excellence provided a significant competitive advantage. The company's capital allocation approach is centered on maximizing total shareholder return, with a focus on dividends, share repurchases, earnings per share growth, M&A, and multiple expansion.

Valuation and Growth Prospects

With a P/E Ratio of 3.43 and a Dividend Yield of 9.24%, Cal-Maine Foods appears to be undervalued. The company's ROE of 52.43% and ROIC of 41.51% indicate strong profitability. Analysts estimate next year's revenue growth at -18.3%, but the company's diversified portfolio and focus on specialty eggs and prepared foods are expected to drive long-term growth. As Sherman Miller stated, "We are excited about the potential for organic growth and M&A opportunities."

Industry Outlook and Competitive Advantage

The company is well-positioned to capitalize on the growing demand for protein-rich foods. Cal-Maine's investment in biosecurity measures, including over $80 million since 2015, has helped safeguard flock health and mitigate the risk of highly pathogenic avian influenza. The company's vertical integration and operational excellence provide a significant competitive advantage, enabling it to maintain a low-cost producer status.

Conclusion on Outlook

As the company continues to expand its specialty and prepared foods offerings, leverage its vertical integration, and pursue disciplined M&A, it is well-positioned to drive growth and create long-term stockholder value. With a compelling combination of value and growth in the food sector, Cal-Maine Foods is an attractive investment opportunity. The current price points should be attractive to consumers, especially with tailwinds, and the company's focus on supply stability will help ensure it has the eggs needed to grow the business.

3. NewsRoom

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Edgestream Partners L.P. Sells 50,432 Shares of Cal-Maine Foods, Inc. $CALM

Dec -06

Source: defenseworld.net

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Cal-Maine Foods Positions for Growth in Prepared Foods with New Leadership and Expansion Plans

Dec -03

Source: globenewswire.com

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Cal-Maine Foods, Inc. $CALM Shares Acquired by Franklin Resources Inc.

Dec -01

Source: defenseworld.net

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Cal-Maine Foods, Inc. $CALM Shares Bought by Creative Planning

Nov -27

Source: defenseworld.net

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Cal‑Maine Foods: Protein Is On Fire - I'm Sold, Rating Is Buy

Nov -25

Source: seekingalpha.com

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Commonwealth of Pennsylvania Public School Empls Retrmt SYS Acquires 1,342 Shares of Cal-Maine Foods, Inc. $CALM

Nov -24

Source: defenseworld.net

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Cal-Maine Foods to Participate in Stephens Annual Investment Conference

Nov -12

Source: globenewswire.com

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Cal-Maine Foods: A Low-Cost Moat In A High-Protein World

Nov -11

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.69%)

6. Segments

Conventional Shell Egg

Expected Growth: 4.65%

Cal-Maine Foods, Inc.'s conventional shell egg segment growth of 4.65% is driven by increasing demand for protein-rich foods, rising consumer preference for cage-free and organic eggs, and strategic acquisitions. Additionally, the company's focus on operational efficiency, cost savings, and investments in technology have contributed to the growth.

Specialty Shell Egg

Expected Growth: 4.83%

Cal-Maine Foods, Inc.'s Specialty Shell Egg segment growth of 4.83% is driven by increasing demand for premium and organic eggs, expansion in retail and foodservice channels, and strategic acquisitions. Additionally, the company's focus on sustainability, animal welfare, and quality control has enhanced its brand reputation, contributing to the segment's growth.

Egg Products

Expected Growth: 4.4%

Cal-Maine Foods' 4.4% growth in egg products is driven by increasing demand for protein-rich foods, rising popularity of egg-based breakfast options, and growing exports to countries with high egg consumption. Additionally, the company's focus on value-added products, such as egg whites and hard-boiled eggs, contributes to its growth.

Other

Expected Growth: 4.5%

Cal-Maine Foods' 4.5% growth is driven by increasing demand for specialty eggs, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on sustainability and animal welfare has led to premium pricing and higher margins. Furthermore, Cal-Maine's diversified customer base and efficient production processes have enabled the company to maintain a strong market position.

7. Detailed Products

Shell Eggs

Cal-Maine Foods, Inc. is one of the largest producers and distributors of shell eggs in the United States, offering a wide range of egg products to meet the needs of various customers.

Liquid Egg Products

The company offers a variety of liquid egg products, including whole eggs, egg whites, and egg yolks, which are used as ingredients in food manufacturing, baking, and foodservice industries.

Dried Egg Products

Cal-Maine Foods, Inc. produces dried egg products, including whole eggs, egg whites, and egg yolks, which are used as ingredients in food manufacturing, baking, and foodservice industries.

Frozen Egg Products

The company offers frozen egg products, including scrambled eggs, omelets, and other frozen egg products, which are used in foodservice industries, such as restaurants and hotels.

Egg Substitutes

Cal-Maine Foods, Inc. produces egg substitutes, which are used as alternatives to eggs in food manufacturing, baking, and foodservice industries.

8. Cal-Maine Foods, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes is low for Cal-Maine Foods, Inc. because eggs are a staple food product with limited substitutes.

Bargaining Power Of Customers

The bargaining power of customers is medium for Cal-Maine Foods, Inc. because while customers have some bargaining power due to the availability of alternative egg producers, the company's strong brand recognition and large customer base mitigate this power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low for Cal-Maine Foods, Inc. because the company is a large buyer of feed and other inputs, giving it significant bargaining power over its suppliers.

Threat Of New Entrants

The threat of new entrants is low for Cal-Maine Foods, Inc. because the egg production industry has significant barriers to entry, including high capital costs and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is medium for Cal-Maine Foods, Inc. because while the egg production industry is competitive, the company's strong market position and brand recognition help to mitigate the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 0.06%
Debt Cost 3.95%
Equity Weight 99.94%
Equity Cost 3.75%
WACC 3.75%
Leverage 0.06%

11. Quality Control: Cal-Maine Foods, Inc. passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Cal-Maine Foods

A-Score: 7.9/10

Value: 8.1

Growth: 9.4

Quality: 8.1

Yield: 10.0

Momentum: 6.5

Volatility: 5.3

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Quality: 7.1

Yield: 5.0

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Volatility: 7.7

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Ingredion

A-Score: 6.5/10

Value: 6.8

Growth: 6.6

Quality: 5.9

Yield: 6.0

Momentum: 3.5

Volatility: 10.0

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CHS

A-Score: 6.2/10

Value: 6.2

Growth: 3.7

Quality: 3.6

Yield: 10.0

Momentum: 3.5

Volatility: 10.0

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Tyson Foods

A-Score: 5.7/10

Value: 6.7

Growth: 3.7

Quality: 3.8

Yield: 7.0

Momentum: 3.5

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Bunge

A-Score: 5.4/10

Value: 8.0

Growth: 5.6

Quality: 3.8

Yield: 6.0

Momentum: 2.5

Volatility: 6.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

84.71$

Current Price

84.71$

Potential

-0.00%

Expected Cash-Flows