Cal-Maine Foods’ Q1 results miss expectations

Cal-Maine Foods Inc. (NASDAQ: CALM) missed revenue expectations and reported a wider-than-expected loss for the first quarter of 2020. Shares were down over 5% in premarket hours on Monday.

Net sales of $241.2 million were down 29.2% from the same period last year and below estimates of $254.5 million.  

The company reported a net loss of $45.8 million, or $0.94 per share, compared to a net income of $12.4 million, or $0.26 per share, in the same period last year. The Q1 2020 results included non-cash impairment charges related to the decommissioning of older facilities. Analysts had forecast a loss of $0.89 per share.

Dolph Baker, Chairman and CEO, stated, “Our financial and operating results for the first quarter reflect the very challenging market conditions that prevailed throughout the summer. While our sales volumes were up 1.7 percent over the first quarter last year, the extreme drop in market prices adversely affected our results. The Southeast large market average price for conventional eggs dropped 40.7 percent for the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019. At the same time, our average sales price was down 30.0 percent for the first quarter compared to the same period last year. The significant drop in market prices reflects the oversupply of eggs that began to affect the market starting in early calendar 2018. This trend has continued as the most recent USDA Chickens and Eggs Report showed 331.4 million laying hens as of September 1, 2019, which was approximately 800,000 more hens than a year ago.”

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The company stated that its specialty egg business will be a primary focus of its growth strategy in fiscal year 2020. In the first quarter, specialty eggs, excluding co-pack sales, accounted for 22.2% of sales volumes, compared with 23.8% a year ago. Specialty egg volumes were affected by the significant price differential between conventional and specialty eggs.

Specialty egg revenue was 44.9% of total shell egg revenue versus 34.2% in the same period last year, reflecting less volatility in the average selling price for specialty eggs. Specialty egg prices were only down 1.4% compared to last year.

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In the first quarter, farm production costs per dozen were up 2.3% over last year. A majority of the increase was due to flock rotation adjustments and higher labor costs. The company’s feed costs per dozen have remained relatively flat since the first quarter of fiscal 2019.

Based on the USDA’s current yield and harvest estimates for the calendar 2019 corn and soybean crops, Cal-Maine expect to have an adequate supply of both grains in fiscal 2020. The company believes ongoing uncertainties and geopolitical issues surrounding trade agreements and international tariffs could create more price volatility in the coming year.

Cal-Maine’s shares have gained over 8% year-to-date.

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