What happened
Shares of Cal-Maine Foods (CALM -2.13%) were moving lower this week after the country's largest egg producer reported strong growth in its fiscal second quarter but missed earnings estimates.
As a result, the stock was down 16.4% for the week through Thursday, according to data from S&P Global Market Intelligence, with the bulk of those losses coming on Thursday after the earnings report came out.
Image source: Getty Images.
So what
Another outbreak of bird flu led to egg prices spiking. Cal-Maine's revenue jumped 110% to $801.7 million, beating estimates at $797.8 million, as prices for conventional eggs hit records, increasing to $2.88 per dozen from $1.15 per dozen in the quarter a year ago. Prices for conventional eggs actually topped those for specialty eggs, which include categories like organic and cage-free, and rose from $1.90 to $2.37 per dozen.
Thanks to the higher prices, earnings per share jumped from $0.02 to $4.07, but that was shy of estimates at $4.24.
Volume sales, which may be a better metric to track Cal-Maine's growth since egg prices are volatile, rose 6% to 284,000 dozen, showing steady growth, and management noted that demand for specialty eggs was particularly strong.
CEO Sherman Miller said, "Our results demonstrate the strength of our operating model and ability to execute our growth strategy in a dynamic environment." He added, "Above all, we remain focused on our mission -- to be the most sustainable producer and reliable supplier of fresh shell eggs and egg products in the United States."
Now what
Cal-Maine stock has actually surged this year, bucking the broader-market trend as it's benefited from rising egg prices. The company also has a unique dividend policy where it pays out a third of its profits as dividends, so investors have directly benefited from the increase in profits.
Based on its recent quarterly dividend payout of $1.35, the stock is paying a dividend of more than 10%, but future dividends will depend on egg prices.
Egg prices are likely to recede eventually, but the national supply of hens is not expected to reach its historical average until December 2023, meaning 2023 could be a bumper year for Cal-Maine as well.
