CalMaine (CALM) Q1 Earnings Top, Plunge Y/Y on Low Prices
CalMaine Foods CALM reported adjusted earnings per share of 2 cents in first-quarter fiscal 2024 (ended Sep 2, 2023), faring better than the Zacks Consensus Estimate of a loss of 1 cent per share. The bottom line however marked a 99% slump from the prior-year quarter, mainly dragged down by lower conventional shell egg prices, increased labor and other input costs.
Low Conventional Egg Prices Hurt Sales & Margins
Sales plunged 30% year over year to $459 million in the first quarter of fiscal 2024. The company had reported an exceptionally strong first-quarter 2023 sales of $658 million.
Average selling prices for shell eggs had soared in fiscal 2023, gaining on the back of the outbreak of the highly pathogenic avian influenza (HPAI) in the United States and higher grain and other input costs. The last year’s quarter’s sales benefited from record average conventional egg selling prices and specialty sales volumes.
However, prices have been on a downtrend since May this year as the egg industry began to recover from the effects of HPAI. Conventional egg net average selling price per dozen was $1.241 in the first quarter of fiscal 2024, down 48% compared with $2.368 in the prior-year quarter. Net average selling price for specialty eggs, however, improved to $2.278 per dozen in the quarter under review compared with $2.101 per dozen for the first quarter of fiscal 2023.
The year-over-year downfall in sales witnessed by CalMaine in the first quarter of fiscal 2024 was primarily due to the lower average selling price for conventional eggs, which was partially offset by the increase in the net average selling price for specialty eggs. The company, however, noted that customer demand has been favorable with conventional egg volumes being higher than a year ago, offset by the lower sales of specialty eggs.
Also, volume of cage-free egg sales has continued to increase and accounted for a greater share of the product mix. Cage-free egg revenues were approximately 33% of the total net shell egg revenues for the first quarter of fiscal 2024.
Cal-Maine Foods, Inc. Price, Consensus and EPS Surprise
Cal-Maine Foods, Inc. price-consensus-eps-surprise-chart | Cal-Maine Foods, Inc. Quote
The cost of sales was down 6% year over year to $414 million in the first quarter of fiscal 2024. Gross profit came in at $45 million, down 79% from the prior-year quarter. The gross margin for the quarter under review was 9.9%, a major contraction from the prior-year quarter’s 33%.
Selling, general and administrative expenses were $52.3 million compared with the prior-year quarter’s $53.6 million. CalMaine reported an operating loss of $6.8 million in first-quarter fiscal 2024 against the operating profit of $164 million in the first quarter of fiscal 2023.
The loss was mainly due to lower conventional shell egg prices and higher labor costs. While feed ingredient price declined in the quarter, CalMaine continued to incur higher input costs at its production, processing and distribution centers. Additional bio-security measures to mitigate the risk of HPAI also led to higher costs.
CalMaine reported cash and cash equivalents of $610 million at the end of first-quarter fiscal 2024 compared with $648 at the end of fiscal 2023.
Cal-Maine Foods announced it will pay a cash dividend of approximately 0.6 cents per share to holders of its common and Class A common stock. The dividend will be paid on Nov 16, 2023, to holders of record on Nov 1, 2023. Cal-Maine Foods’ has a variable dividend policy. In the quarter in which the company reports net income, it pays a cash dividend to shareholders, which is an amount equal to one-third of such quarterly income.
CalMaine recently announced it has entered into an agreement to acquire certain assets of Fassio Egg Farms, Inc. Fassio’s assets, which are to be acquired by CalMaine, have a current capacity of approximately 1.2 million laying hens, primarily cage-free, feed mill, pullets, fertilizer production and composting operation and land in Erda, UT, outside Salt Lake City. The transaction is expected to close in the second quarter of fiscal 2024, subject to customary closing conditions.
Price Performance
CALM shares have declined 14% in the past year against the industry’s 9% growth.
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Zacks Rank & Stocks to Consider
CalMaine currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Hawkins, Inc. HWKN, Carpenter Technology Corporation CRS and L.B. Foster Company FSTR. HWKN and CRS sport a Zacks Rank #1 (Strong Buy) at present, and FSTR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares have gained 58% in the last year.
Carpenter Technology has an average trailing four-quarter earnings surprise of 10%. The Zacks Consensus Estimate for CRS’s fiscal 2024 earnings is pegged at $3.48 per share. The consensus estimate for 2023 earnings has moved 8% north in the past 60 days. Its shares have gained 109.6% in the last year.
L.B. Foster has an average trailing four-quarter earnings surprise of 134.5%. The Zacks Consensus Estimate for FSTR’s 2023 earnings is pegged at 53 cents per share. Earnings estimates have been unchanged in the past 60 days. FSTR’s shares gained 98.4% in the last year.
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