Please ensure Javascript is enabled for purposes of website accessibility

Why Cal-Maine Foods Stock Dropped Today

By Steve Symington - Jul 20, 2015 at 12:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is Cal-Maine's plunge meaningful? Or just another movement?

What: Shares of Cal-Maine Foods (CALM 2.06%) dropped as much as 11% Monday morning after the egg producer reported weaker-than-expected fiscal-fourth-quarter 2015 results. By 1:40 p.m., the stock had regained ground and was down just 2.8% from the previous close.

So what: Quarterly revenue rose 8.4% year over year to $403 million, which translated to 46.3% growth in net income to $46.1 million, or $0.95 per diluted share. That's all well and good, but analysts were anticipating higher earnings of $1.04 per share on revenue of $418 million.

Nonetheless, Cal-Maine CEO Dolph Baker insisted the quarter "marked a strong finish to another record year for Cal-Maine Foods." In particular, specialty eggs -- including cage free varieties -- were a strong contributor to growth.

Now what: At the same time, while average feed costs for the fiscal year fell 10.9% thanks to a record harvest of corn and soybean crops last fall, Baker also warned the company expects feed ingredient prices to be volatile in the year ahead. In addition, egg prices have climbed significantly in recent months thanks to outbreaks of avian flu in the upper midwest U.S. that have reduced the size of the national flock by 13%. Going forward, prices are expected to remain high until the flock is replenished.

It's obvious the market hates uncertainty despite the fact there have been no positive avian flu tests at Cal-Maine locations. But Cal-Maine has also incurred additional expenses to increase biosecurity measures at every location, and any participants in the national egg industry will inevitably be guilty by association and subject to the potential ire of uninformed consumers. Given the added risk of feed prices swinging in an unfavorable direction -- and with the caveat that I don't think existing Cal-Maine investors should be panicking right now -- I'm personally content watching Cal-Maine Foods stock from the sidelines. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cal-Maine Foods, Inc. Stock Quote
Cal-Maine Foods, Inc.
$49.42 (2.06%) $1.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.