In a press release at close of trading on March 28^th Cal-Maine Foods Inc. (CALM) announced results for the 3^rd Quarter of FY 2023 ending February 25^th 2023. The Company exceeded the topline consensus estimate of $888 million and the analysts’ projected EPS of $5.47. This report summarizes data provided in the Company release and the concurrently filed Q-10 Report

Cal-Maine represents a bellwether for the shell egg sector as the only public-quoted mainly pure-play company in the industry. The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as $ x 1,000 except EPS)

Notes: $17.1 million ‘other income,’ Q3 2023 compared to $13.5 million in Q3 FY2022:

$26 million gain on disposal of assets, Q3 2023 compared to $42 million loss in Q2 2022.

$ 0.3 million royalty Income, Q3 2023 compared to $0.3 million Q3 2022.

$10.2 million patronage dividend Q3 2023 compared to $10.1 million Q3 2022.

$6.1 million interest income, Q3 FY 2023 compared to $0.1 million Q3 2022

$86.2 million capital expenditure Q3 2023 compared to $49 million Q3 2022

$450,000 loss on non-controlling interest Q3 2023 compared to $63,000 in Q3 2022.

No acquisitions in Q3 2023

Trailing P/E 5.6

52-Week Range in Share Price: $43.96 to $65.32 50-day Moving average $55.76

Market Close, Tuesday, March 28^th pre-release: $54.27.

After hours, post release up 3.7 percent to $56.30.

In reviewing the CALM Q3 2023 quarterly report the following calculated values represent key data for the most recent Quarter. (Q3 Fiscal 2022 and percent difference in parentheses):-

• Shell egg sales attained $961,227,000 in Q3 2023 based on this category representing 96.7 percent of total revenue. ($463,578,000 in Q2 2022, based on 97.3 percent of revenue. (Sales value up by 107.3 percent)

• Dozen shell eggs sold (thousands): 291,416 (287,651; +1.3%)
• Average selling price of all shell eggs from data released: $3.30 per dozen; ($1.61 per dozen; +105.0%).
• Average selling price of specialty eggs (excluding co-pack) from data released: $2.62 cents per dozen; ($1.92 per dozen; +36.4%).
• Average selling price of generic eggs from data released: $3.69 cents per dozen; ($1.46 cents per dozen; +152.7%).
• Differential for specialty eggs against generic eggs: -$1.07 cents per dozen; (+$0.46 per dozen; -332.6%)
• Specialty eggs as a proportion of volume sold: 35.7%; (33.1%; +7.9%)
• Specialty eggs as a proportion of sales value: 28.2%; (39.4%; -28.4%)
• Proportion of eggs sold that were produced by Cal-Maine and contract flocks: 90.3% (91.9%; -1.7%).
• Farm feed cost: 67.9 cents per dozen, (56.2 cents per dozen, +20.8%)
• Egg product sales attained $32.6 million with a unit value of $1.93 per lb.($12.8 million, up 154.7 percent; $0.88 per lb. up 119.3 percent)
• During Q3 FY 2023 cage-free eggs attained 17.8 percent of sales value compared to 24.0 percent in Q3 FY 2022. Sales volume however increased 14.9 percent over Q3 FY 2022.
• Cal-Maine Foods maintained a flock of 43.3 million hens with 9.9 million pullets including parent breeders representing less than two percent of the total, at the end of Q3 FY 2023. 

The following observations relate to the comparison of Q3 2023 with the corresponding quarter in 2022:-

• Cal-Maine Foods was not affected by the 2022-2023 HPAI epornitic as of the release.
• Q3 of FY 2023 represented a more favorable marketing comparison to Q3 2022 based on higher prices for shell eggs, as influenced by depopulation of 44 million hens in the U.S. prior to and during Q3, coupled with high consumer demand. Restrictions due to COVID on institutional and consumer segments were in large measure removed during Q3 of FY 2023
• Gross profit was impacted positively by higher unit revenue for generic eggs but offset by significantly higher farm production costs including feed (67.9 cents per dozen, up 21.4 percent from Q3 2022) and additionally by inflation in labor, fuel packaging and consumables (40.0 cents per dozen up 14.3 percent from Q3 2022).
• In a market characterized by high unit prices, the relative contribution of specialty eggs is less important to net earnings in contrast to a down market as in previous years. Enigmatically generic eggs generated a higher unit price and presumably margin compared to specialty eggs.
• Responding to increased demand coupled with the shortage of available eggs Cal-Maine increased the purchase of nest run eggs for packing and sale to 9.1 percent of sales volume compared to 8.1 percent compared to the corresponding Q3 of FY 2022.
• The Family-trust and other insider shareholding amounted to 10.9 percent of equity, with institutions holding 93.9 percent. Shares short on March 15^th attained 19.7 percent of float.
• Cal-Maine Foods declared a dividend of $2.20 per Class A share.

In commenting on results for the 1^st Quarter of FY 2023, Sherman Miller, CEO of Cal-Maine Foods stated, “Cal-Maine Foods delivered a solid performance for the third quarter of fiscal 2023. Our results are reflective of a dynamic market environment with higher average selling prices and favorable demand. Elevated market pricing continues, primarily due to the impact of the ongoing epidemic of highly pathogenic avian influenza (“HPAI”), which has significantly reduced the nation’s egg-laying capacity. At the same time, consumer demand for shell eggs remained robust in the third quarter, which included the peak winter holiday season. We are grateful that the Cal-Maine Foods’ team delivered more eggs to meet the needs of our customers during the quarter and continued to successfully focus on our goal of expanding our specialty egg production capacity”.

In relation to sales strategy Miller stated “The domestic egg market has always been intensely competitive and highly volatile even under normal market circumstances. At Cal-Maine Foods, we sell our eggs to a diverse group of retail customers, including national and regional grocery chains, club stores, companies that supply to independent supermarkets, food service distributors and egg product customers. The majority of our conventional eggs are sold based on market quotes published by Urner Barry, an independent, third-party market reporter. We are a producer and distributor and do not sell eggs directly to consumers”.

In conclusion Miller opined “We have worked hard to respond to the challenging operating environment, targeting optimal management of every aspect of our business within our control. As always, we are focused on the long-term, working within the proven operating model that has served us well throughout the various cycles that characterize our industry. In combination with the current inflationary environment, the HPAI epidemic has created additional challenges for all producers, with increasing costs and supply chain disruptions. We are grateful to our dedicated managers and employees across our production facilities who have efficiently managed our operations during this time. We have invested substantial capital and management resources in our biosecurity measures, and these investments, along with our employees’ diligent adherence to our robust biosecurity protocols, have allowed us to continue to produce and bring more quality eggs to the market. There have been no positive tests for HPAI at any Cal-Maine Foods’ owned or contracted production facility as of March 28, 2023. Together, we are committed to our mission – to be the most sustainable producer and reliable supplier of fresh shell eggs and egg products in the United States,”

Max Bowman, CFO of Cal-Maine Foods, added, “Our financial results for the quarter were led by net sales of $997.5 million compared with $477.5 million for the same period last year. Net income for the third quarter of fiscal 2023 was $323.2 million, or $6.62 per diluted share, compared with $39.5 million, or $0.81 per diluted share, for the third quarter of fiscal 2022. These results reflect the significantly higher market prices and favorable demand boosted by the busy holiday season. We remained focused on disciplined management of our costs during the quarter despite continued inflationary pressures and a tight labor market.”

The Q-10 Report documented approved capital investment of $178.5 million for cage-free conversions and additional upgrades to processing for FY 2024 through FY 2027. Of this total $61 million had been committed with $117.8 million to be assigned.

The Company joined in the formation of ProEgg, Inc. a Capper-Volstead Act Farmers’ Cooperative to distribute eggs in 13 western states. The objective is to enhance service to customers in the region by ensuring a secure supply chain.