Topline
Cal-Maine Foods, the nation’s biggest egg producer, experienced a seven-fold year-over-year jump in quarterly profits in the three-month period ending February 25, according to its Tuesday afternoon earnings report, a jarring revelation into how the company cashed in on soaring egg prices.
It’s been a profitable time to be in the egg business.
Key Facts
Cal-Maine sold 291,000 cartons of a dozen eggs at an average price of $3.30 per carton last quarter, an increase of 1.3% in unit sales compared to the same period last year at more than twice the price.
Thanks to soaring retail egg prices nationwide as Cal-Maine’s competitors dealt with an avian flu outbreak that caused egg shortages, Cal-Maine scored $323 million in profits last quarter, a 718% year-over-year increase and a more than 2,000% increase from the same period in 2021.
In a statement accompanying the earnings release, Cal-Maine CEO Sherman Miller defended his company’s surge in profits and warded off price-gouging accusations, noting his company is simply a “producer and distributor” that doesn’t sell directly to consumers and thus does not dictate market prices.
Shares of Cal-Maine jumped 9% in early Wednesday trading, adding more than $200 million in market capitalization.
The company also announced it would make a $2.20 quarterly dividend payment to its shareholders, by far its highest dividend yield of the last five years, according to FactSet data.
But analysts predict Cal-Maine’s eye-popping financials will soon tumble back to earth as egg prices fall across the country: Analysts polled by FactSet project Cal-Maine’s quarterly revenue and profits to decline 28% and 50% next quarter, respectively, though both metrics will remain well above pre-2022 levels.
Key Background
Cal-Maine is by far the largest egg producer in the U.S., owning more than 75% more egg-producing hens than the next largest company, according to industry publication Watt Poultry. Egg prices spiked in late 2022 and early this year, as consumers paid 70% more for eggs in January 2023 compared to January 2022. The dramatic rise in egg prices came amid a nationwide outbreak of avian flu. Remarkably, none of Cal-Maine’s hens have tested positive for the disease, Miller said Tuesday. Egg buyers have begun to experience some relief, with egg prices dropping in February for the first time in five months.
Chief Critic
Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Ca.) questioned whether Cal-Maine’s rise in profits were the product of price gouging in a February letter addressed to Adolphus Baker, Miller’s predecessor as Cal-Maine CEO. “American families working to put food on the table deserve to know whether the increased prices they are paying for eggs represent a legitimate response to reduced supply or out-of-control corporate greed,” the lawmakers wrote.
Further Reading
Egg Prices Finally Drop 6.7% In Biggest Decline Since 2020—But Remain Historically Expensive (Forbes)
Wholesale Egg Prices Tank 36%—Fueling Unexpected Drop In Food Inflation (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/03/29/countrys-largest-egg-producer-saw-profits-surge-718-amid-shortage/