Cal-Maine Foods (CALM) Tops Q2 EPS by 1c, Revenues Miss

Cal-Maine Foods (NASDAQ: CALM) reported Q2 EPS of $0.49, $0.01 better than the analyst estimate of $0.48. Revenue for the quarter came in at $356 million versus the consensus estimate of $362.92 million.

Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, Inc., stated, “Cal-Maine Foods had solid financial and operating performance for the second quarter of fiscal 2019 amidst less favorable market conditions than the same time last year. Our sales for the second quarter were down 1.4 percent, reflecting a modest decline in volumes and lower average customer selling prices for conventional eggs compared with a year ago.

“While we experienced volatility in market prices during the quarter, our overall average customer selling price for shell eggs was down only 0.8 percent, compared with the second quarter of fiscal 2018. Per capita egg consumption is up near historical levels, but supply concerns appear to be affecting market prices. According to the USDA, the hatch is up 10 percent year to date, but the actual hen inventory is up only 2.8 percent. Hen numbers are forecasted to continue trending upwards for the next several months, which may continue to affect market prices into 2019.

“We are pleased with the trends in our specialty egg business, as total dozens sold of specialty eggs during the quarter, excluding co-pack sales, were up 3.7 percent over the same period last year. Specialty eggs continue to be popular with consumers who are willing to pay higher prices compared with conventional eggs. Specialty egg prices were up 2.9 percent in the second quarter of fiscal 2019, compared with the same period a year ago. Specialty egg revenue was 35.0 percent of our total shell egg revenue, compared with 32.3 percent for the second quarter of fiscal 2018. As demand trends change, we will continue to provide our customers with a favorable product mix of healthy and affordable options including conventional, cage-free, nutritionally enhanced and organic eggs.

“We continue to invest in our operations to improve overall efficiency and to prepare for the expected continued increase in demand for specialty eggs, especially cage-free eggs. We are near completion of several major capital projects at Cal-Maine Foods’ facilities and will continue to strategically expand our production capacity.

“We are closely monitoring industry developments surrounding the recent passing of Proposition 12 in California, which mandates that all eggs or egg products sold in California must be cage-free by 2022. While this referendum will clearly affect sourcing and production of eggs in California, we also expect it to affect future supply and pricing in other areas of the country. With our strong balance sheet and proven management systems, Cal-Maine Foods is well positioned to capitalize on this opportunity to expand our operations or consider potential acquisitions.

“Our operations ran well through the fall. Our farm production costs per dozen were up 5.5 percent, primarily related to increased feed costs. For the second quarter of fiscal 2019, overall production was relatively flat compared with a year ago. Our feed costs per dozen increased 7.0 percent, due to the higher cost of feed ingredients, primarily related to less favorable crop conditions in the south central United States, which adversely affected ingredient prices at some of our larger feed mill operations. The USDA reported a record harvest for this calendar year’s national corn and soybean crops, which should provide an ample supply of feed ingredients for fiscal 2019. However, grain prices have been volatile due to the geopolitical issues and uncertainties surrounding the latest international tariff policies.

“In spite of changing industry dynamics, we remain focused on executing our same growth strategy as we move into the second half of fiscal 2019. We will strive to continue to manage our operations in an efficient and responsible manner, and to provide a favorable product mix, including cage-free and other specialty eggs, that meets the needs of our valued customers. We look forward to the additional opportunities ahead for Cal-Maine Foods,” concluded Baker.

For earnings history and earnings-related data on Cal-Maine Foods (CALM) click here.

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