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Earnings preview: Costs to hurt Cal-Maine Foods in Q1

Cal-Maine Foods Inc. (NASDAQ: CALM) is set to report its first-quarter earnings results on Monday, September 30, before the market opens. The results will be impacted by the geopolitical issues around trade agreements and international tariffs as well as unfavorable supply and demand balance.

The results will also be hurt by egg supply growth trends as well as higher costs and expenses. The egg producer will continue to invest in its operations and identify acquisition or other growth opportunities that enhance its production. Also, the company is expected to not pay a dividend for the first quarter until it achieves profitability on a cumulative basis.

For many years, Cal-Maine Foods have pursued a growth strategy focused on the acquisition of existing shell egg production and processing facilities, as well as the construction of new and more efficient facilities. The company continues to upgrade, modify, and invest its facilities to meet the changing demand of cage-free eggs over the next several years.

Earnings preview: Costs to hurt Cal-Maine Foods in Q1
Image for representation. Courtesy: Erol Ahmed on Unsplash

Analysts expect the company to report a loss of $0.89 per share on revenue of $254.52 million for the first quarter. In comparison, during the previous year quarter, Cal-Maine Foods posted a profit of $0.26 per share on revenue of $340.58 million. The company has surprised investors by beating analysts’ expectations twice in the past four quarters.

For the fourth quarter, Cal-Maine Foods slipped to a loss from a profit last year, due to more challenging market conditions. The unfavorable supply and demand balance and anticipated future egg supply growth trends have continued to affect market prices and the company’s business. Net sales decreased by 37% year-over-year.

Looking ahead, the egg producer expects its feed costs to be more volatile and potentially higher in fiscal 2020. The grain prices are expected to be hurt by reduced exports due to the ongoing uncertainties and geopolitical issues surrounding trade agreements and international tariffs.

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