Cal-Maine Foods stock took a sharp dive on Wednesday as investors analyzed the latest financial results of the egg producer, which fell significantly short of Wall Street estimates.
In the company's quarterly report, it revealed that egg prices experienced a decline during the period ending on September 2nd, while flock sizes remained historically low due to the bird flu outbreak that occurred last year.
According to data from Dow Jones Market Data, shares of Cal-Maine plummeted 9.3% to $43.06 on Wednesday, reaching their lowest closing price since February 2022. This decrease marks the largest percentage drop since December 2022.
For its fiscal first quarter, Cal-Maine reported earnings of only two cents per share on Tuesday evening, which fell far below the consensus estimate of 33 cents per share. This also represents a significant decline from the $2.57 per share earned during the same period last year. Furthermore, the quarter's revenue of $459.3 million was well below analyst estimates of $479.5 million and marked a steep decrease from the $658 million recorded a year ago.
Chief Executive Sherman Miller acknowledged the changes in egg prices, stating in the earnings release, "After reaching record high levels in fiscal 2023, average selling prices for shell eggs have since returned to more normalized levels."
Consumers experienced higher egg prices last year, with a staggering 59.9% increase in December 2022 compared to the previous year, as indicated by consumer price index data. This surge followed an avian influenza outbreak that severely impacted chicken populations and consequently affected the egg supply.
Overall, it is clear that unfavorable market conditions and ongoing challenges have contributed to Cal-Maine Foods' disappointing financial results.
The Price of Eggs and the Impact of the Bird Flu Outbreak
Introduction
In recent times, the price of eggs experienced a significant increase due to the outbreak of bird flu. However, there has been a decline in prices as the situation gradually improves. According to CPI data, egg prices dropped by 18% in August 2023 compared to the previous year.
Ongoing Recovery from the Outbreak
Cal-Maine, one of the leading egg producers in the United States, stated that although the country's layer hen flock has mostly recovered from the bird flu outbreak, it still remains slightly below the five-year average.
Challenges Faced by Cal-Maine
In addition to the impact of the outbreak, Cal-Maine faced other challenges during the quarter. Sales of specialty eggs declined, while conventional egg volumes were higher compared to the previous year. The company also had to grapple with inflationary pressures such as increased labor costs.
Analyst's Perspective
Goldman Sachs analyst Adam Samuelson adjusted his price target on Cal-Maine stock to $39 from $40 and maintained his Sell rating on the stock. Samuelson highlighted the difficulties arising from a combination of rising costs and lower selling prices.
Specifically, Samuelson noted that specialty egg pricing fell short of forecasts. On-farm production costs exceeded expectations due to continued labor inflation and higher costs associated with a larger proportion of cage-free eggs.
Future Outlook
Samuelson predicts that both these trends will persist as Cal-Maine continues to shift its production towards cage-free eggs and as conventional egg supply normalizes.
