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What Are Cal-Maine Foods’ Key Strengths?

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Low-cost producer

In the recent Stephens Spring Investment Conference, Cal-Maine Foods (CALM) discussed its key strengths. One of the strengths is the company being a low-cost egg producer. The company has fully integrated operations in 16 states in the US. Cal-Maine produces ~75% of its total shell eggs sold—96% comes from company-owned facilities and the other 4% comes from contract producers.

The company’s fully integrated operations include feed mills, breeder flocks, hatcheries, pullet growing, egg production, processing and packaging, and sales and distribution. Its company-owned facilities are fully automated, temperature controlled, and labor efficient state-of-the-art facilities.

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Favorable consumer demand trends with solid customer base

The company takes pride in providing tasty, affordable, and convenient sources of protein to consumers. Cal-Maine enhances its product mix to meet customers’ needs. The company’s top four customers are leading names in the retail and food service industry. They account for around 51% of its sales. Walmart (WMT) and Sam’s Club hold ~26% of sales. The company’s top ten customers represent about 68% of its sales.

Attractive growth profile

Cal-Maine Foods’ other key strengths include holding a strong balance sheet to acquire additional acquisition opportunities to work on its growth strategy. The company thinks that it has a solid financial position to support future growth. We discussed the growth strategy in Part 3 of this series.

Cal-Maine Foods holds the largest market share in the grocery segment for shell eggs. Peers in the industry include Pilgrim’s Pride (PPC), Fresh Del Monte Produce (FDP), and Industrias Bachoco (IBA). They reported year-to-date returns of 22%, 36%, and -4%, respectively, as of June 28. The Advisor Shares TrimTabs Float Shrink ETF (TTFS) invests 1.3% of its portfolio in Pilgrim’s Pride.

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