CALM - Cal-Maine Foods stock slips on earnings miss signs of egg price peak

Cal-Maine Foods ( NASDAQ: CALM ) shares slid in premarket trading on Thursday as its fiscal Q2 earnings missed expectations.

The Mississippi-based company that counts itself as the largest producer and distributor of fresh shell eggs in the United States posted $4.07 in earnings per share on $801.7M in sales, both of which were cited as records. However, even the record levels reflected some disappointment against Wall Street estimates of $4.26 and $797.1M, respectively. The company also highlighted the fact that egg prices have more than doubled from 2021 levels. Conventional egg net average selling price per dozen jumped to $2.883 from $1.151 a year ago, while specialty eggs rose 24.9% to $2.37 per dozen from $1.898 per dozen in the prior year quarter.

“These results reflect the current market environment characterized by record average selling prices for conventional eggs, primarily due to reduced supply related to the outbreak in the U.S. of highly pathogenic avian influenza and good customer demand,” CEO Sherman Miller explained. “There have been no positive tests for HPAI at any of Cal-Maine Foods’ owned or contracted production facilities as of December 28, 2022. Consumer demand for shell eggs continued to be good in the quarter, especially leading up to the Thanksgiving holiday, and we experienced record quarterly volume levels for specialty eggs sold.”

However, he also noted that feed costs have increased substantially, weighing on margins even as egg prices explode. Given the lack of HPAI cases detected to close December, there is also concern that egg prices will soon normalize as more supply comes available, adding pressure on the bottom line.

That said, the company was cautious on projecting a return to normal egg supply.

“Prior to the outbreak of HPAI in February 2022, the layer hen flock five-year average from 2017 through 2021 was comprised of approximately 328 million hens,” the company’s earnings release explained. “According to a LEAP Market Analytics report dated December 8, 2022, the layer hen inventory is not projected to exceed the 328 million mark again until December of 2023.”

Shares of Cal-Maine Foods ( CALM ) fell 4.39% in premarket action on Thursday.

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