Fresh egg producer Cal-Maine Foods (NASDAQ:CALM) grew its sales volume in the fiscal fourth quarter, but average selling price tumbled amid a supply-demand imbalance. Revenue was down more than 30% from the prior-year period, and the company posted a substantial loss. Following its variable dividend policy, Cal-Maine won't be paying investors a dividend for the fourth quarter.

A rough quarter

Cal-Maine sold 254.8 million dozen eggs during the fourth quarter, up 1.1% year over year. But that volume increase was no match for collapsing prices. Net average selling price per dozen was just $1.062 during the quarter, down 37.3% year over year. The Southeast was particularly weak, with market prices for conventional eggs down 52%.

The net result of these price declines was a very weak quarter, in terms of both revenue and the bottom line.


Q4 2019

Q4 2018


Compared to Average Analyst Estimate 


$280.6 million

$443.1 million


Missed by $13.66 million

Earnings per share




Missed by $0.15

Data source: Cal-Maine Foods.

"The unfavorable supply and demand balance and anticipated future egg supply growth trends have continued to affect market prices and our business. Over the past five quarters, we have noted our concern about the growing hatch rate pointing to a potential significant increase in laying hens and an oversupply of eggs," said Cal-Maine CEO Dolph Baker in prepared remarks included along with the earnings release.

The USDA reported 341.5 million hens as of April 1, a near-record number. On top of the abundance of hens, a more productive flock and an increased hatch rate are exacerbating the oversupply of eggs. "If these trends continue, we expect further pressure on market prices through calendar 2019," Baker added.

Slumping prices for conventional eggs created a larger price difference between conventional and specialty eggs, which led to a 1.2% decline in average selling price and lower sales volume for Cal-Maine's pricier products. Specialty eggs generated about $117.6 million of revenue in the quarter, down from $128.5 million in the prior-year period.

Carton holding 15 brown eggs

Image source: Getty Images.

No dividend, and more challenges ahead

Cal-Maine follows a variable dividend policy, where the dividend is set each quarter based on the net income produced by the company. In a profitable quarter, Cal-Maine pays a cash dividend equivalent to one-third of its net income. In a quarter where net income is negative, no dividend is paid. Following an unprofitable quarter, the company restarts the dividend only when its cumulative profits, starting from when the last dividend was paid, turn positive.

With Cal-Maine reporting a loss in the fourth quarter, the company won't be paying a dividend to shareholders.

Looking ahead, Cal-Maine sees problems other than price pressure. Feed costs are expected to be volatile in fiscal 2020, with historic rainfall and flooding putting upward pressure on grain prices, and lower exports due to tariffs putting downward pressure on grain prices. "As such, we expect our feed costs to be more volatile and potentially higher in fiscal 2020," Baker said.

The potential for declining selling prices and rising feed costs over the next few quarters doesn't bode well for the bottom line or the dividend. Fiscal 2020 is shaping up to be a rough year for Cal-Maine Foods.

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