Cal-Maine Foods (CALM) has a market cap of $2.3 billion. It reported net sales of $609.9 million for the first quarter of fiscal 2016, compared to net sales of $356.9 million for the first quarter of fiscal 2015. Sales improved by 70.9% compared to the same quarter a year ago. The average selling prices were up by 65.7% compared to fiscal 1Q15 and contributed to the rise in revenue. The company sold nearly 259 million dozen eggs at a net average selling price of $2.24 per dozen in 1Q16. This was in comparison to 252 million dozen eggs sold at a net average selling price of $1.35 per dozen in the corresponding quarter of 2015. Finally, feed costs fell to $0.42 in fiscal 1Q16 compared to $0.48 per dozen in fiscal 1Q15.
In a press release, the company’s management mentioned that the outbreak of avian flu earlier this year that hit the US chicken and egg suppliers led to rising egg prices. Also, the company is still experiencing the effects of the substantial reduction in the national laying hen flock that happened at the beginning of 2015. This was related to the avian influenza outbreaks in the upper Midwestern United States. The management believes that egg prices will remain very high until the supply situation returns to more normal levels.
The company’s management added that there was no further news on the outbreak of the virus. However, the company continues to monitor the situation and is working with egg industry associations and government officials to identify ways to mitigate the risk of future outbreaks. They reported no positive tests for the virus at any of their locations. However, they did strengthen their biosecurity measures at all of their facilities, leading to higher expenditures in the first quarter.
Other key results
The company’s margins improved in fiscal 1Q16 compared to the same quarter a year ago. It reported an operating margin of 36.1%, a net margin of 23.5%, and gross margin of 43.1%. With the rise in income, the cash and cash equivalents rose to $356 million in 1Q16, a rise of 37.5% on a quarterly basis.
Operating earnings improved to $220.1 million compared to $41.2 million for 1Q15. This rise was supported by a 13.4% fall in the average feed costs per dozen compared to the same quarter a year ago. The overall farm production costs per dozen were 8% lower than the first quarter of fiscal 2015. These lower costs were balanced by considerably higher prices paid for purchased eggs, increased processing costs, and higher costs for cartons and packaging.
Cal-Maine’s peer in the industry Hormel Foods (HRL) reported a net margin of 7.8% while Tyson Foods (TSN) and Pilgrim’s Pride (PPC) reported net margins of 2.5% and 6%, respectively, for their last reported quarters. The PowerShares S&P 500 High-Quality Portfolio (SPHQ) invests 1.3% in HRL stock while the Advisor Shares TrimTabs Float Shrink ETF (TTFS) invests 1.2% of its portfolio in PPC stock.