CALM - Cal-Maine Foods: Bird Flu Pre-Easter Seasonality And Upcoming Earnings Report
2024-03-22 19:25:59 ET
Summary
- The shell egg market's delicate balance of supply and demand affects Cal-Maine Foods, with Q3 2024 earnings expected to reflect rising egg prices.
- The company experienced record-breaking top and bottom line results in FY2023 due to a number of external factors.
- Despite potential quarterly improvements, the stock's lofty valuation and unlikely outperformance compared to the previous year suggest a hold recommendation.
The shell egg world is a delicate juggle between supply and demand dynamics. Just after Easter, USA's largest shell egg producer and distributor, Cal-Maine Foods, Inc. ( CALM ), will release its Q3 2024 Earnings results. Results will be positively influenced by the average egg price, which has shown an upward trend in 2024 as the winter season increased bird flu cases , reducing the country's egg supply. In one month, the average price per dozen eggs jumped by $0.48 to $3 in February. Furthermore, pre-Easter happens to be one of the seasons with the highest egg demand for egg producers. On the cost side, I would expect to see better margins as corn and soybean supplies increase, pushing down the chicken feed prices in 2024. However, the stock is currently trading at a premium, increasing by 28.43% in the last six months. Last financial year, we got a taste of just how much Americans are willing to pay for eggs, and the company experienced a complete outlier of a year with record-breaking top and bottom line results, which I believe also still impacts the stock price today. Unless we see inflation soar and a severe bird flu outbreak in the next few months, it is unlikely that Cal-Maine can top last year's performance. Therefore, I do not recommend buying the stock and maintain a hold rating....
Cal-Maine Foods: Bird Flu, Pre-Easter Seasonality And Upcoming Earnings Report