Cal-Maine Foods(CALM) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 fiscal 2026, net sales were $769.5 million, down 19.4% from $954.7 million in Q2 fiscal 2025 [14] - Total shell egg sales decreased by 28.1% to $649.6 million, with selling prices down 26.5% and sales volumes down 2.2% [14] - Gross profit fell 41.8% to $207.4 million, primarily due to lower shell egg selling prices [15] - Operating income decreased by 55.5% to $123.9 million, with an operating income margin of 16.1% [15] - Net income attributable to the company was $102.8 million, down 53.1% from $219.1 million [15] - Diluted earnings per share were $2.13, down 52.3% from $4.47 [15] - For the first half of fiscal 2026, net sales were $1.7 billion, down 2.8% [18] Business Line Data and Key Metrics Changes - Shell egg sales represented 84.4% of total net sales in Q2 fiscal 2026, down from 94.7% [3] - Specialty eggs accounted for 44% of total shell egg sales, up from 31.7% [4] - Prepared food sales surged 586.4% to $71.7 million compared to $10.4 million in Q2 fiscal 2025 [14] - Specialty egg sales in the first half of fiscal 2026 were $569.2 million, up 4.7% with 3.8% higher sales volumes [19] Market Data and Key Metrics Changes - Breeder flocks grew by 12.7%, and total chicks hatched rose by 65.1% [14] - The average number of layer hens expanded by 2.6% [14] - Prepared foods capacity is expected to increase by more than 30% over the next 18 to 24 months [9] Company Strategy and Development Direction - The company is evolving into a more resilient, strategically diversified portfolio, focusing on specialty eggs and prepared foods [6] - Investments include a $15 million project to expand prepared foods capabilities, expected to add $17 million in annual scrambled egg production [7] - The company aims to demonstrate long-term growth through multiple growth engines and a focus on consumer preferences [22] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of reliability in supply to build trust with retailers and consumers [11] - The company is positioned to manage through cycles effectively, emphasizing a strong balance sheet and disciplined capital allocation [12] - Management expressed confidence in the growth of specialty eggs and prepared foods, targeting a 30% growth in prepared foods over the next 18-24 months [25] Other Important Information - The company maintains a strong cash position and an unlevered balance sheet, allowing for targeted acquisitions and capital returns [17] - A cash dividend of approximately $0.72 per share is scheduled for payment on February 12, 2026 [17] Q&A Session Summary Question: How does the company view earnings power in depressed egg markets? - Management noted that the company is in a better position than in previous downturns due to diversification into specialty eggs and prepared foods, which are expected to perform well even in lower markets [24][27] Question: What is the expected gross margin for prepared foods moving forward? - Management indicated a target of a 19% EBITDA margin for prepared foods, despite some expected slippage in the near term [28] Question: How does the company plan to utilize outside egg purchases as supplies normalize? - Management stated that outside egg purchases are expected to decline as production increases, aiming for a 93%-95% self-produced sales ratio [47][49] Question: What is the outlook on bird flu cases and its impact on the industry? - Management expressed concern over the ongoing presence of the virus globally, indicating that the situation remains precarious despite recent decreases in bird flu cases [50][51]