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Higher Egg Prices Benefited Cal-Maine’s Revenue in 3Q16

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Revenue grew, beat estimates

Cal-Maine Foods (CALM) continued its trend of positive revenue growth in fiscal 3Q16. The revenue for 3Q16 was $449.8 million—a 2.8% increase compared to $437.6 million in 3Q15. For the first nine months of fiscal 2016, net sales rose 37% to $1,605.6 million—compared to $1,173.1 million in the same period a year ago.

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What drove the revenue?

Higher average selling prices for eggs drove the increased revenue. The average selling prices for shell eggs for fiscal 3Q16 rose by 4.3%—compared to the same quarter a year ago. However, if you compare it to the high levels throughout fiscal 2015, it fell substantially. The average selling prices for eggs increased 35.6% year-to-date in fiscal 2016. Cal-Maine Foods’ higher sales volume trend continues in each quarter of fiscal 2016. However, it experienced a decline of 1.9% in 3Q16—compared to the same quarter last year.

Specialty eggs have been an important factor in driving revenue growth in fiscal 2016. Specialty eggs’ volume rose 13.7% in the third quarter. They accounted for 23.6% of the total number of shell eggs sold—compared to 20.3% in fiscal 3Q15. They also contributed to 31.0% of the total shell egg revenue for the quarter—compared to 26.9% of the total shell egg revenue for 3Q15.

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Additional strategies

Cal-Maine Foods is strategizing to pursue additional opportunities to market and sell specialty eggs due to changing consumer demand trends.

Management also mentioned that “As the food service industry, restaurant chains and major retailers are increasingly demanding more cage-free eggs in response to market forces, we are working with our customers to facilitate a smooth transition to meet this demand. We believe Cal-Maine Foods is well positioned to respond to dynamic market conditions and future demand trends. In addition to cage-free eggs, we provide our customers with a full selection of conventional, nutritionally enhanced and organic eggs, and we will continue to enhance our product mix to meet the needs of our customers.”

Peer’ revenue

Cal-Maine Foods’ peers in the industry include Pilgrim’s Pride (PPC), Hormel Foods (HRL), and Tyson Foods (TSN). Pilgrim’s Pride, Hormel, and Tyson’s revenue fell 7%, 4%, and 15% for their last reported quarter. The iShares Morningstar Mid Value ETF (JKI) and the VanEck Vectors Agribusiness ETF (MOO) invest 1.2% and 3.4%, respectively, of their portfolios in Tyson Foods.

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