Cal-Maine Foods (NASDAQ: CALM) reported Q1 EPS of $0.26, $0.17 worse than the analyst estimate of $0.43. Revenue for the quarter came in at $340.6 million versus the consensus estimate of $344.1 million.

Dolph Baker, chairman and chief executive officer of Cal-Maine Foods, Inc., stated, “We were pleased to begin fiscal 2019 with a solid financial and operating performance, as we experienced more favorable market conditions than a year ago. Our sales for the first quarter were up 29.6 percent, reflecting higher average customer selling prices for shell eggs and consistent sales volumes compared with the same period a year ago.

“While we experienced some volatility in market prices during the quarter, our average customer selling price for shell eggs was up 28.5 percent compared with the first quarter of fiscal 2018. According to recent reports from IRI, a consumer market research firm, demand trends have been favorable for retail customers. Food service demand remained steady and year-to-date shell egg exports were slightly higher than the same period last year. Together, these trends have supported market prices with a manageable level of egg supply. Although overall egg production growth has been modest, according to recent USDA reports, the number of chicks hatched has increased 11 percent since the beginning of calendar 2018, indicating future increases in laying hen numbers. Given these trends, the potential increase in the shell egg supply could create additional pricing pressure.

“Total dozens sold of specialty eggs, excluding co-pack sales, were up 9.7 percent over the same period last year, as consumer demand for specialty eggs has continued to support this segment of the egg market. Specialty egg prices were steady for the first quarter of fiscal 2019, with the average customer selling price at approximately the same level as a year ago. Specialty egg revenue was 34.2 percent of our total shell egg revenue, compared with 39.6 percent for the first quarter of fiscal 2018, due to higher market prices for non-specialty eggs in the current period. We remain focused on providing our customers with a favorable product mix of healthy and affordable options including conventional, cage-free, nutritionally enhanced and organic eggs.

“With the expected increase in demand for cage-free eggs, we are prepared to meet the needs of national retail grocery stores and restaurant chains who have pledged to move away from conventional eggs. We currently have additional capital projects underway to convert Cal-Maine Foods’ facilities to convertible/cage-free capacity and replace less efficient production. These projects are designed to offer the flexibility to produce conventional eggs or cage-free eggs, allowing us to more effectively manage our future product mix.

“Our operations ran well through the summer, and we reported operating income of $12.7 million compared with an operating loss of $24.4 million for the first quarter of fiscal 2018. For the first quarter of fiscal 2019, our farm production costs per dozen were up 7.3 percent, primarily due to increased feed costs. For the first quarter of fiscal 2019, our overall production was down 2.0 percent compared with a year ago, as we adjusted flock rotations to maximize production for the upcoming holiday season. Our feed costs per dozen were up 10.1 percent, due to the higher cost of feed ingredients, primarily soybean meal. Based on the USDA’s estimates for a record harvest for this year’s corn and soybean crops, we expect to have an ample supply of feed ingredients for fiscal 2019. However, grain prices have been volatile with the recently imposed international tariffs creating market uncertainty.

“In spite of changing market conditions, we remain focused on the aspects of our business that we can control. As always, we will manage our operations as efficiently as possible, strive to provide a favorable product mix, including cage-free and other specialty eggs, and continue to meet the needs of our valued customers with exceptional service. We look forward to the opportunities ahead for Cal-Maine Foods in fiscal 2019,” said Baker.

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