Cal-Maine Reports on Q1 of FY 2019


In a press release dated October 1st Cal-Maine Foods announced results for the 1st Quarter of Fiscal 2019, ending September 1 st 2018.

The following table summarizes the results for Q1 compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)


1st Quarter Ending.

Sept. 1st 2018

Sept. 2nd 2017

Difference (%)






Gross profit:





Operating income:





Pre-tax Income

Net Income








Diluted earnings per share:





Gross Margin (%)





Operating Margin (%)





Profit Margin (%)





Long-term Debt: Sept. 1st '18/ June 2nd '18



- 41.1


12 Months Trailing:


Return on Assets (%)



Return on Equity (%)



Operating Margin (%)



Profit Margin (%)



Total Assets Sept. 1st '18/ June 2nd '18





Market Capitalization



52-Week Range in Share Price: $38.51 to $52.31

Market Close Sept. 28th 48.30 post-release Noon $44.82 (-7.21%)

Forward P/E: 18.1 Beta -0.2

CALM fell 7.2 percent in the first 2.5 hours of trading as the Company missed consensus estimates for the top-line of $350 million and $0.49 EPS. The Company announced a dividend of 8.5 cents down from 35.0 cents.

In reviewing the CALM quarterly report the following calculated values 1 represent key data for the most recent Quarter. (Q1 Fiscal 2018 in parentheses):-

  • Dozen shell eggs sold: 250,060,000: (249,464,000: +0.2%)

  • Average selling price of all shell eggs2: $1.33 per dozen; ($1.03 per dozen: +29.2%).

  • Average selling price of specialty eggs calculated from data released: $1.92 cents per dozen: ($1.88 per dozen; +2.1%).

  • Average selling price of generic eggs calculated from data released: $1.15 cents per dozen; ($0.80 cents per dozen; +43.7%).

  • Differential between generic and specialty eggs: $0.77 cents per dozen; ($0.78 per dozen; +1.2%)

  • Specialty eggs as a proportion of volume sold: 23.8%; (21.7%; +9.6%)

  • Specialty eggs as a proportion of sales value: 34.2%; (39.6%; -13.6%)

  • Proportion of eggs sold actually produced by Cal-Maine flocks: 83.7%; (85.6%; -2.2%).

  • Feed cost: 41.0 cents per dozen (38.0 cents per dozen; +7.8%)

NOTES 1. Assumes that 98 percent of sales value was derived from shell eggs.

2. Based on stated proportions of volumes and revenue for specialty and generic eggs.

In commenting on Q1 FY 2019 results, Chairman and CEO Dolph Baker stated "While we experienced some volatility in market prices during the quarter, our average customer selling price for shell eggs was up 28.5 percent compared with the first quarter of fiscal 2018. According to recent reports from IRI, a consumer market research firm, demand trends have been favorable for retail customers. Food service demand remained steady and year-to-date shell egg exports were slightly higher than the same period last year. Together, these trends have supported market prices with a manageable level of egg supply. Although overall egg production growth has been modest, according to recent USDA reports, the number of chicks hatched has increased 11 percent since the beginning of calendar 2018, indicating future increases in laying hen numbers. Given these trends, the potential increase in the shell egg supply could create additional pricing pressure.

Baker continued "Total dozens sold of specialty eggs, excluding co-pack sales, were up 9.7 percent over the same period last year, as consumer demand for specialty eggs has continued to support this segment of the egg market. Specialty egg prices were steady for the first quarter of fiscal 2019, with the average customer selling price at approximately the same level as a year ago. We remain focused on providing our customers with a favorable product mix of healthy and affordable options including conventional, cage-free, nutritionally enhanced and organic eggs.

In evaluating the dilemma of conversion to cage-free production Baker stated "With the expected increase in demand for cage-free eggs, we are prepared to meet the needs of national retail grocery stores and restaurant chains who have pledged to move away from conventional eggs. We currently have additional capital projects underway to convert Cal-Maine Foods' facilities to convertible/cage-free capacity and replace less efficient production. These projects are designed to offer the flexibility to produce conventional eggs or cage-free eggs, allowing us to more effectively manage our future product mix.

He continued "for the first quarter of fiscal 2019, our farm production costs per dozen were up 7.3 percent, primarily due to increased feed costs. For the first quarter of fiscal 2019, our overall production was down 2.0 percent compared with a year ago, as we adjusted flock rotations to maximize production for the upcoming holiday season. Our feed costs per dozen were up 10.1 percent, due to the higher cost of feed ingredients, primarily soybean meal. Based on USDA estimates for a record harvest for this year's corn and soybean crops, we expect to have an ample supply of feed ingredients for fiscal 2019. However, grain prices have been volatile with the recently imposed international tariffs creating market uncertainty.

The conclusions from the comparisons of Q1 2019 and the corresponding Q1 of 2018 are:

  • CALM is heavily committed to shell eggs and is subject to market pressures especially as the Company has a narrow customer base with a concentration on one major chain. A significant competitor has the capability to divert shell eggs to egg products for domestic and export under market conditions favoring breaking.

  • When generic prices are low CALM understandably benefits from specialty egg unit revenue. There are obvious restraints to increasing volume of this category despite higher prices for generics in Q1 2019.

  • Feed cost at 41.0 cents per dozen is considered to be high for the Southeast and South Central regions in which CALM operates. Standard values documented by USDA for feed cost reflecting the two regions during the 3rd Quarter of calendar 2018 amounted to 35 cents per dozen. It is recognized that CALM produces specialty eggs which may incur an additional 5 cents per dozen in feed cost. A proportion of 25 percent specialty eggs should add at most 2 cents per dozen above the average cost cited in the Q4 report. Each 1 cent per dozen reduction in feed cost would represent an incremental $2.1 million in net profit based on Q1 volume.