Cal-Maine Foods Stock Soars 67% in a Year: Can It Sustain the Rally?

Core Insights - Cal-Maine Foods, Inc. (CALM) has experienced a significant price increase of 66.6% over the past year, contrasting with a 15.8% decline in the industry [1] - The Basic Materials sector has decreased by 3.5%, while the S&P 500 has gained 11.6% during the same period [1] Price Performance - CALM has outperformed poultry-related stocks such as Post Holdings, Inc. (POST), Pilgrim's Pride Corporation (PPC), and Vital Farms, Inc. (VITL) [3] Valuation Metrics - CALM is currently trading at a forward P/E ratio of 17.08X, which is a premium compared to the industry average of 10.19X [6][8] - Vital Farms trades at a higher P/E of 23.15X, while Post Holdings and Pilgrim's Pride are trading at lower multiples of 15.21X and 8.92X, respectively [10] Earnings Estimates - Earnings estimates for CALM have been revised downward over the past 60 days, with the fiscal 2025 estimate at $22.73 per share, indicating a year-over-year increase of 299.5%, while the fiscal 2026 estimate is $5.71, suggesting a decline of 74.9% [13] Market Dynamics - Recent declines in egg prices, from $6.23 in March to $3.34 in June, may impact CALM's sales and margins [6][17] - The U.S. Department of Agriculture reported that outbreaks of highly pathogenic avian influenza (HPAI) led to the depopulation of millions of birds, initially driving egg prices to record highs [15] Strategic Initiatives - CALM is investing $60 million in capital projects to increase its cage-free egg production capacity by 1.1 million hens and 250,000 pullets [18] - The acquisition of ISE America's assets last year added 1 million cage-free laying hens, while the purchase of Deal-Rite Feeds, Inc. aimed to reduce production costs [19] - The company is diversifying its product portfolio by investing in Meadowcreek Foods and Crepini Foods, and acquiring Echo Lake Foods, which focuses on ready-to-eat egg products [20] Profitability Metrics - CALM's return on equity (ROE) stands at 48.72%, significantly higher than the industry average of 11.96% and the S&P 500's 32.01% [22] Final Assessment - Despite CALM's successful expansion and product diversification, moderating egg prices and downward earnings revisions suggest that selling the stock may be prudent at this time [23]