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CALM Trades at a Premium to Industry: Should You Buy the Stock?
CALMCal-Maine Foods(CALM) ZACKS·2025-03-10 17:20

Core Viewpoint - CalMaine Foods, Inc. (CALM) is outperforming the agriculture products industry, with significant growth in stock price and earnings driven by high egg prices and demand [1][4][9]. Financial Performance - CALM's stock has increased by 49.1% over the past year, while the agriculture industry has declined by 8.4% [4]. - The company reported earnings per share of 4.47inQ2fiscal2025,asubstantialincreasefrom4.47 in Q2 fiscal 2025, a substantial increase from 0.35 in the same quarter last year, with sales rising 82.5% to 955million[9][10].ReturnMetrics−Returnonequitystandsat33.7955 million [9][10]. Return Metrics - Return on equity stands at 33.7%, significantly higher than the sector average of 10.4% and the S&P 500's 31.1% [6]. - Return on assets is at 27.1%, compared to the sector's 5.2% and the S&P 500's 8.3%, indicating efficient asset utilization [6]. Analyst Sentiment - The Zacks Consensus Estimate for CALM's earnings in 2025 and 2026 has increased by 82.6% and 34.4%, respectively, reflecting positive analyst sentiment [7]. Growth Drivers - CALM is investing 60 million in new capital projects to expand cage-free capacity, which includes adding production capacity for 1.1 million cage-free layer hens and 250,000 pullets by late summer 2025 [11]. - The company is also expanding its egg product processing facility in Georgia with a 15millioninvestmenttoproduceextendedshelf−lifeliquideggproducts[12].−Recentacquisitions,includingassetsfromDeal−RiteFeeds,Inc.,willhelplowerproductioncostsandimproveefficiencies[13].MarketConditions−Higheggpricesaredrivenbysupplyconstraintsduetooutbreaksofhighlypathogenicavianinfluenza(HPAI),whichhaveledtothedepopulationof30.3millionbirdsthisyear[10][15].−TheUSDAhasinitiateda15 million investment to produce extended shelf-life liquid egg products [12]. - Recent acquisitions, including assets from Deal-Rite Feeds, Inc., will help lower production costs and improve efficiencies [13]. Market Conditions - High egg prices are driven by supply constraints due to outbreaks of highly pathogenic avian influenza (HPAI), which have led to the depopulation of 30.3 million birds this year [10][15]. - The USDA has initiated a 1 billion strategy to combat HPAI and stabilize egg prices, which includes funding for biosecurity and financial relief for affected farmers [16]. Strategic Initiatives - CALM is diversifying its product offerings by investing in ventures like Meadowcreek Foods and Crepini Foods, aiming to reach major retailers with value-added egg products [14]. - The company's expansion into specialty egg production and cage-free operations positions it for long-term growth and competitive advantage [17].