Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 2 Apr, 25 | CALM | Buy | USD 92.08 | USD 96.6 | USD 100.0 | 8 days | 8.6% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Cal-Maine Foods, Inc., together with its subsidiaries, engages in the production, grading, packaging, marketing, and distribution of shell eggs and egg products. The company offers specialty eggs, such as nutritionally enhanced, cage free, organic, free-range, pasture-raised, and brown eggs, as well as conventional eggs under the Egg-Land's Best, Land O' Lakes, Farmhouse Eggs, Sunups, Sunny Meadow, and 4-Grain brand names. It sells its products to various customers, including national and regional grocery store chains, club stores, independent supermarkets, foodservice distributors, and egg product consumers primarily in the southwestern, southeastern, mid-western, northeastern, and mid-Atlantic regions of the United States. The company was founded in 1957 and is headquartered in Ridgeland, Mississippi.
Improved Profitability – Net income increased from $17.0 million in Q2 FY24 to $219.1 million in Q2 FY25, a more than 1,188% rise
Strong Revenue Growth – Net sales surged 82.5% year-over-year, from $523.2 million to $954.7 million
Declining Contribution from Specialty Egg Sales (Dollar Terms) – Specialty egg sales accounted for 31.7% of total revenue, down from 43.7% in the prior-year period
Higher Costs for External Egg Purchases – The company faced a significant increase in costs for outside egg procurement due to supply shortages
Cal-Maine Foods faces key investment risks, including potential disruptions from future HPAI outbreaks, volatility in feed costs, regulatory changes impacting egg production standards, and shifts in consumer preferences toward alternative protein sources.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 92.08 | 82.0 | 96.6 | 100.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Robust Financial and Operational Performance
Cal-Maine Foods reported a strong financial and operational performance for the second quarter of fiscal 2025, driven by increased demand for shell eggs and favorable market conditions. The company achieved net sales of $954.7 million, a significant increase compared to $523.2 million in the same period last year. Net income for the quarter was $219.1 million, or $4.47 per diluted share, a sharp rise from $17.0 million, or $0.35 per diluted share, in the second quarter of fiscal 2024. The increase in revenue and profitability was supported by higher market prices and record-breaking total and specialty dozens sold.
Growth in Shell Egg Sales and Market Demand
The company sold 329.8 million dozen shell eggs in the quarter, compared to 288.2 million dozen in the prior-year period, reflecting a 14.4% increase. Sales of conventional eggs rose 8.9% to 209.6 million dozen, while specialty egg volumes surged by over 25% to 120.2 million dozen. The net average selling price per dozen increased to $2.740 from $1.730 in the previous year. This growth was attributed to strong demand, including seasonal holiday-related purchases, and constrained supply levels due to outbreaks of highly pathogenic avian influenza (HPAI).
Strategic Investments and Expansion Initiatives
Cal-Maine Foods is actively investing in its production capabilities to support future growth. The company has allocated approximately $60 million to expand its cage-free egg production capacity, including the construction of five new cage-free layer houses and two pullet houses across Florida, Georgia, Utah, and Texas. Upon completion in late summer 2025, these projects will accommodate an additional 1.1 million cage-free layer hens and 250,000 pullets. Additionally, a $15 million investment is being directed toward expanding the company’s egg products processing facility in Blackshear, Georgia, to enhance extended shelf-life liquid egg production.
Supply Chain Challenges and Cost Management
The company successfully managed its production and sourcing operations amid ongoing supply chain disruptions and increased input costs. Farm production costs per dozen were 8.5% lower compared to the prior-year period, primarily due to a 12.8% reduction in feed costs per dozen. However, costs for outside egg purchases rose significantly due to higher market prices and increased purchases to meet seasonal demand. Despite these challenges, Cal-Maine Foods leveraged its scale and recent acquisitions to mitigate the impact of fluctuating supply conditions.
Impact of HPAI on Production and Biosecurity Measures
The outbreaks of HPAI in the United States have continued to affect the poultry industry, leading to the depopulation of 38.4 million commercial layer hens and 1.8 million pullets in 2024. In December alone, 13.6 million commercial layer hens and 500,000 pullets were affected. Although Cal-Maine Foods’ Kansas and Texas facilities that experienced HPAI in fiscal 2024 are now fully operational, the risk of future outbreaks remains high, particularly during bird migration seasons. The company maintains strict biosecurity measures to safeguard its operations but acknowledges that no farm is entirely immune to the disease.
Outlook and Dividend Payment
Looking ahead, Cal-Maine Foods remains focused on strengthening its market position through organic growth and strategic acquisitions. The company is expanding its egg products portfolio to diversify its offerings and capitalize on increasing demand in the foodservice and retail sectors. For the second quarter of fiscal 2025, the company will distribute a cash dividend of approximately $1.49 per share, in line with its variable dividend policy. This dividend is payable on February 13, 2025, to shareholders of record as of January 29, 2025.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Cal-Maine Foods, Inc (NASDAQ: CALM) at the closing market price of USD 92.08, as on April 01, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Farm Products
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| CALM Cal-Maine Foods Inc |
0.49 0.53% | 93.59 | 11.94 | - | 1.93 | 2.62 | 1.60 | 6.67 |
| ADM Archer-Daniels-Midland Company |
-0.54 1.11% | 48.00 | 14.60 | 10.52 | 0.28 | 1.12 | 0.40 | 8.49 |
| TSN Tyson Foods Inc |
0.18 0.30% | 61.58 | - | 24.94 | 0.34 | 1.00 | 0.51 | 26.68 |
| BG Bunge Limited |
-0.62 0.77% | 79.47 | 10.84 | 10.76 | 0.22 | 1.16 | 0.29 | 5.96 |
| MNHVF Mowi ASA |
- -% | 18.14 | 19.37 | 9.03 | 1.64 | 2.33 | 2.08 | 8.19 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is April 01,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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