Cal-Maine's (NASDAQ:CALM) Posts Q2 Sales In Line With Estimates But Stock Drops
Egg company Cal-Maine Foods (NASDAQ:CALM) reported results in line with analysts' expectations in Q2 FY2024, with revenue down 34.7% year on year to $523.2 million. It made a GAAP profit of $0.35 per share, down from its profit of $4.07 per share in the same quarter last year.
Key Takeaways from Cal-Maine's Q2 Results
We struggled to find many strong positives in these results. Although Cal-Maine's sales volumes increased, the average selling price for a dozen of its conventional eggs plummeted from $2.88 in the same quarter last year to $1.46 (49% year-on-year drop). This significant headwind caused the company to miss analysts' gross margin, operating margin, and EPS estimates.
Furthermore, the egg industry saw outbreaks of highly pathogenic avian influenza (HPAI) in November 2023. Cal-Maine wasn't spared, and it was forced to depopulate approximately 1.5 million laying hens, or 3.3% of its total flock. This event will reduce the egg supply in the United States until the layer hen flock is fully replenished, meaning the price of eggs is likely to rise again. Despite these headwinds, Cal-Maine has a healthy balance sheet that will enable it to weather the storm.
Overall, this was a mixed quarter for Cal-Maine. The company is down 5.7% on the results and currently trades at $51.77 per share.
Is now the time to buy Cal-Maine? Find out by accessing our full research report, it's free.
Cal-Maine (CALM) Q2 FY2024 Highlights:
Market Capitalization: $2.78 billion
Revenue: $523.2 million vs analyst estimates of $525.4 million (small miss)
EPS: $0.35 vs analyst estimates of $0.83 (-$0.48 miss)
Gross Margin (GAAP): 17.4%, down from 39.6% in the same quarter last year
Sherman Miller, president and chief executive officer of Cal-Maine Foods, Inc., stated, “Cal-Maine Foods delivered a solid financial and operating performance for the second quarter of fiscal 2024 in the face of dynamic market conditions. Our sales reflect a different market environment from a year ago, with significantly lower average selling prices. However, our total volumes sold were up slightly over a year ago, as consumer demand for shell eggs continued to be favorable in the quarter, especially leading up to the Thanksgiving holiday. As always, we strive to offer consumers a wide range of quality choices in shell eggs as well as enhanced egg products offerings. Our ability to meet changing demand trends with a favorable product mix has been an important differentiator for Cal-Maine Foods. With solid execution, we continued to meet the needs of our customers. We commend our managers and employees across our production facilities who continued to efficiently manage our operations and keep pace with changing demand."
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.
Packaged Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
Cal-Maine carries some recognizable brands and products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, Cal-Maine can still achieve high growth rates because its revenue base is not yet monstrous.
As you can see below, the company's annualized revenue growth rate of 22.9% over the last three years was exceptional for a consumer staples business.
This quarter, Cal-Maine missed Wall Street's estimates and reported a rather uninspiring 34.7% year-on-year revenue decline, generating $523.2 million in revenue. Looking ahead, Wall Street expects revenue to decline 26.7% over the next 12 months.
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Cal-Maine may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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