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High egg prices have been very beneficial to Cal-Maine Foods CALM as the largest producer and distributor of shell eggs in the United States.
Cal-Maine stock has rallied after crushing its fiscal third-quarter earnings expectations on Tuesday. Let’s see if investors should buy into the rally with shares of CALM up 9% following the stellar Q3 results.
Q3 Review
Cal-Maine was expected to have a strong quarter with the average cost of a dozen eggs still over $4 according to the latest CPI numbers. Still, Cal-Maine’s bottom line was more impressive than many analysts imagined beating EPS estimates by 30% at $6.62 compared to expectations of $5.09 per share.
Year over year, third-quarter earnings were up a staggering 717% with EPS at $0.81 in Q3 2022. On the top line, sales more than doubled to $997.5 million from $447.5 million in the prior year quarter.
Along with high inflation, the HPAI epidemic (Bird Flu) continued to cause a shortage in egg supplies during the quarter. While Cal-Maine has been able to benefit from the supply shortage investors will want to monitor the company’s growth as this operating environment has been challenging despite the company’s recent success.
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Earnings Outlook
According to Zacks estimates Cal-Maines earnings are now forecasted to soar 499% this year at $16.30 per share compared to EPS of $2.72 in 2022. Fiscal 2024 earnings are projected to drop -67% to $5.28 per share following what will be a very tough to compete against year.
Earnings estatmite revisions have remained much higher throughout the quarter but have slightly declined over the last 30 days although this may change as analyst digest Cal-Maine’s Q3 results.
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Performance & Valuation
Year to date, Cal-Maine stock is up +9% to beat the S&P 500’s +5%, the Agriculture-Products Markets -1%, and fellow industry giant Bunge Limited’s (BG) -4%. More Impressive, shares of CALM are now up +54% over the last two years to largely outperform the benchmark, Bunge Limited, and its Zacks Subindustyr’s -2%.
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Trading around $59 per share and 9% from its 52-week highs Cal-Maine stock trades at just 3.5X forward earnings. This is nicely beneath its industry average of 10.7X and the S&P 500’s 18.5X.
Even better, shares of CALM trade well below their decade high of 258.8X and at an 87% discount to the median of 29.3X.
Takeaway
Cal-Maine Foods stock certainly looks undervalued based on its earnings outlook and P/E valuation. However, the market is forward-looking and tends to price in upcoming factors such as the plausibility that egg prices will not remain this high as inflation begins to ease and that supply will be restored once the HPAI epidemic subsides.
To that point, Cal-Maine Foods stock lands a Zacks Rank #3 (Hold). While there could certainly be more upside in shares of CALM there may also be better buying opportunities after the most recent rally.
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Cal-Maine Foods, Inc. (CALM) : Free Stock Analysis Report
Bunge Limited (BG) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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