News

CalMaine Foods, Inc. CALM reported earnings per share of $3.00 in third-quarter fiscal 2024 (ended Mar 2, 2024). The bottom line marked a 55% decline from the year-ago quarter.

Sales plunged 29.5% year over year to $703 million in the third quarter of fiscal 2024. The company reported exceptionally strong third-quarter fiscal 2023 sales of $997 million mainly due to record-high egg prices. Last year the shell egg industry had witnessed record high market prices triggered by the highly pathogenic avian influenza ("HPAI") and other market factors that had led to a significant reduction in the supply.

The year-over-year downfall reported in the third quarter of fiscal 2024 was driven by the substantial drop in the net average selling price of eggs that offset the gains from record egg sales.

Net average selling price (per dozen) was $2.247 in the third quarter of fiscal 2024 compared with $3.298 in the year-ago quarter, indicating a 32% drop. The net average selling price per dozen for conventional eggs in the quarter under review was down 41.5% year over year to $2.152. Net average selling price for specialty eggs declined 7.7% year over year to $2.415 per dozen.

The company reported record sales volumes of 300.8 million total dozens in the third quarter of fiscal 2024, which improved 3.2% year over year. Conventional eggs sold were 192.2 million dozen, up 2.6% year over year. Specialty egg sales attained a record 108.6 million dozen, a 4.4% increase from the year-ago quarter. Consumer demand has been strong, especially during the winter holiday season.

In the third quarter of fiscal 2024, specialty dozens accounted for 38.5% of total sales, up from 28.2% in the third quarter of fiscal 2023.

Operational Update

The cost of sales was down 9.3% year over year to $484 million in the third quarter of fiscal 2024. Gross profit was around $219 million, down 53% from the year-ago quarter. The gross margin for the quarter under review was 31.1%, a major contraction from the year-ago quarter’s 46.4%.

Selling, general and administrative expenses were $66 million compared with the year-ago quarter’s $58 million. CalMaine reported an operating profit of $163 million in third-quarter fiscal 2024 compared with $408 million in the third quarter of fiscal 2023.

The decline in operating profit was primarily driven by lower market prices, partially offset by the gains from lower feed ingredient prices. Other farm production costs were higher mainly due to higher flock amortization and increased facility costs.

Other Updates

CalMaine reported cash and cash equivalents of roughly $695 million at the end of third-quarter fiscal 2024 compared with $648 at the end of fiscal 2023.

The company announced that it would pay a cash dividend of $1.00 per share to holders of its common and Class A common stock. The dividend will be paid out on May 16, 2024, to holders of record as of May 1, 2024. Per CALM's variable dividend policy, whenever the company reports quarterly net income, it allocates one-third of that income as a cash dividend to its shareholders.

The integration of acquired assets of Fassio Egg Farms located in Erda, UT, which was completed in the second fiscal quarter of 2024, is currently underway.

CalMaine Foods recently completed the acquisition of a broiler processing plant, hatchery and feed mill in Dexter, MO from Tyson Foods, Inc. TSN. The company intends to repurpose the acquired assets for use in egg and egg products production. CalMaine anticipates entering into an arrangement with some of Tyson's former contract farmers to convert their operations to support CALM's egg production operations.

HPAI Detected at Kansas & Texas Facilities

The company reported that during the third quarter of fiscal 2024, it encountered an outbreak of HPAI within its facilities in Kansas, leading to the depopulation of around 1.5 million laying hens and 240,000 pullets. Subsequently, on Apr 1, 2024, one of its facilities situated in Parmer County, TX, tested positive for HPAI, leading to the depopulation of roughly 1.6 million laying hens and 337,000 pullets. Production at the facility has been halted as per USDA protocols. Cal-Maine Foods is working to secure production from other facilities to minimize disruption to its customers.

CALM shares have declined 3.4% in the past year against the industry’s 8% 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 Ecolab Inc. ECL and Carpenter Technology Corporation CRS. Both ECL and CRS sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ecolab’s 2024 earnings is pegged at $6.39 per share, indicating an increase of 22.7% from the prior year’s reported number. It has an average trailing four-quarter earnings surprise of 1.7%. ECL shares have gained 37% in a year.

The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $4.00 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 14.3%. CRS shares have gained 59% in a year.

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