Bull of the Day: Cal-Maine Foods (CALM)

Core Viewpoint - Cal-Maine Foods is experiencing record egg sales and soaring earnings due to an ongoing egg shortage caused by avian influenza, raising questions about the timing for potential stock purchases [1][2]. Financial Performance - In the fiscal second quarter of 2025, Cal-Maine Foods reported net sales of $954.7 million, a significant increase from $523.2 million the previous year, driven by higher average selling prices and increased sales volume [2]. - The average selling price per dozen eggs rose to $2.74 from $1.73 year-over-year, attributed to the egg shortage [3]. - The company sold 329.8 million dozens of shell eggs, up from 288.2 million in the same period last year, with conventional egg sales increasing by 8.9% [4]. Strategic Investments - Cal-Maine Foods is making strategic investments to expand operations amid the egg shortage, with approximately $60 million allocated for new capital projects to enhance cage-free capacity [5]. - The company plans to add five new cage-free layer houses and two pullet houses across various states, expecting to increase capacity for 1.1 million cage-free layer hens and 250,000 pullets by late summer 2025 [6]. Earnings Outlook - Analysts are optimistic about Cal-Maine Foods' fiscal 2025 earnings, with the Zacks Consensus estimate rising to $15.59 from $8.54, indicating a 174% growth compared to $5.69 in fiscal 2024 [7]. - The ongoing egg price increases are expected to continue due to persistent shortages, with significant depopulation of commercial layer hens and pullets due to bird flu [7]. Dividend Policy - Cal-Maine Foods has a variable dividend policy, paying a cash dividend equal to one-third of quarterly net income, with a recent dividend of $1.49 per share declared for the fiscal second quarter [9]. Market Performance - The stock of Cal-Maine Foods has surged over the past year as egg prices and earnings have risen, although some investors are beginning to take profits [10]. - The stock is currently trading at a low valuation of 7x earnings, but concerns exist about future earnings declines impacting stock value [12].