CALM - Anyone care about egg prices anymore? Bull case $140.

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October 01, 2025

Cal-Maine Foods Investment Report - Q4 FY2025 Record Performance

CAL-MAINE FOODS (CALM)

🥚🐔 America's #1 Egg Producer | First-Ever Earnings Call Marks New Era of Transparency

Q1 FY2026 Results | $923M Q1 Revenue +17% YoY, $4.12 EPS Beat $5.35 Est, Prepared Foods 9% of Sales, Echo Lake Exceeding Expectations

💰 Market Cap: $4.7B | 🏢 Employees: 4,100+ | 🌍 US Market Leader
👨‍💼 CEO Sherman Miller | 🚀 Capacity Expansion | 🎯 Echo Lake Acquisition
$92.48
📉 -$1.62 (-1.72%) Last Session
Current Price
Price Target Scenarios

18-Month Horizon (2026 Targets)

$140.00
Bull Case (+51%)
Extended HPAI Crisis
Capacity Leadership
📊 Valuation Calculation:
• 2026E EPS: $20.00 × P/E: 7.0x = $140.00
🚀 Key Assumptions:
HPAI outbreaks extend through 2026 keeping supply tight • Cal-Maine's capacity increases capture market share • Egg prices remain elevated at $3+ per dozen • Echo Lake delivers full $15M+ synergies and organic growth accelerates • Specialty egg penetration expands to 40%+ of sales • Cage-free transition accelerates profitably • Feed costs remain favorable • Variable dividend policy returns $6-8/share annually
$105.00
Base Case (+14%)
Gradual Normalization
Steady Growth
📊 Valuation Calculation:
• 2026E EPS: $12.00 × P/E: 8.8x = $105.00
⚖️ Key Assumptions:
HPAI normalizes by mid-2026 with supply recovery • Egg prices decline to $2.20-2.50 per dozen range • Specialty eggs grow to 38% of total volume • Echo Lake integration on track with moderate synergies • Feed costs remain manageable with normal volatility • Capacity additions proceed as planned • Variable dividend returns $3-4/share annually • Market share maintained at 17-19%
$62.00
Bear Case (-33%)
Rapid Oversupply
Price Collapse
📊 Valuation Calculation:
• 2026E EPS: $6.50 × P/E: 9.5x = $62.00
🔻 Key Assumptions:
HPAI ends abruptly with rapid industry recovery • Egg prices crash to $1.50-1.80 per dozen • Overcapacity from aggressive industry expansion • Feed costs spike with corn/soy price increases • Consumer recession reduces premium egg demand • DOJ antitrust investigation escalates • Cage-free transition costs exceed benefits • Echo Lake integration challenges • Variable dividend suspended with minimal profitability
Bottom Line for Retail Investors
🥚
Market Dominance
America's largest egg producer with 17-19% market share, vertically integrated operations from hatcheries to distribution, strong brand portfolio (Egg-Land's Best, Land O' Lakes), trusted supplier to major retailers nationwide
📈
Strategic Transformation
First-ever earnings call marking commitment to institutional transparency, Q1 strongest in company history, specialty eggs and prepared foods now 40% of net sales, Echo Lake ahead of all initial projections, new CSO appointed to accelerate growth
💰
Upside Catalysts
Ongoing HPAI keeping supply tight with 79M hens depopulated in 18 months, egg prices elevated at $3.31/dozen (+55% YoY), specialty eggs 39% of volume (+16% growth), Echo Lake acquisition diversifying into prepared foods with $15M synergy target, $500M share buyback authorized
⚠️
Risk Factors
Cyclical volatility when HPAI normalizes causing price crashes, DOJ civil investigation into potential price-fixing, consumer recession risk reducing premium egg demand, feed cost exposure to corn/soy prices, execution risk on $258M Echo Lake integration, cage-free transition requiring major capex

📊 Q1 FY2026 "Strongest First Quarter in History - First Earnings Call Era Begins" Performance

$923M Q1 Revenue +17% YoY, EPS $4.12 Beat Analysts, Net Income $199M +33% YoY, Specialty + Prepared Foods 40% of Sales, Echo Lake $71M Sales Exceeding Projections, Migration Season HPAI Concerns Rising

💵
$923M
Q1 FY2026 Revenue
+17% YoY vs $786M
📊
$4.12
Q1 Diluted EPS
+35% YoY vs $3.06
📈
33.7%
Q1 Gross Margin
+220 bps vs 31.5%
🥚
40%
Specialty + Prepared Mix
Growth Engine Accelerating

📞 Key Q1 FY2026 Earnings Call Highlights (First-Ever Call)

🎯
Portfolio Transformation Accelerating
Specialty eggs + prepared foods now 40% of net sales marking major milestone, shell eggs 85.6% of sales (down 80bps as prepared foods scale), specialty eggs $284M sales +10% with double-digit cage-free/pasture-raised growth, conventional $506M +4%, diversification strategy delivering higher-margin mix shift
🏭
Echo Lake Exceeding All Targets
Prepared foods $84M sales +800% with Echo Lake contributing $71M, margins meeting/exceeding initial projections with "no buyer's remorse," $15M+ annual synergies on track or better, $14.8M pancake line approved adding ~10% capacity at Burlington WI, team executing flawlessly on integration
📊
Operational Excellence Delivering
Gross profit $311M +26% with margin expansion to 33.7% (+220bps), operating income $249M or 27% of sales (+320bps), feed costs down 4% saving $6M, breeder flocks +46%, chicks hatched +77%, layer hens +10%, dozens sold +2.5% with specialty +7.5%, $80M+ biosecurity investments since 2015
⚠️
HPAI Migration Season Threat
3.1M hens already depopulated since Sept 1 USDA count of 301M layers, industry at 301M vs 340M needed (rule of thumb: 1 hen per US person), migration season "turning volume up" with early turkey flock outbreaks, "early indicators are that birds are carrying it" with violent strain capable of infecting poultry

📍 CEO Commentary - Sherman Miller: "This is an important milestone for us as it marks our first ever earnings call. I'm humbled realizing the dedication of our CalMain family... CalMain has always been about people, our 4,000+ employees, customers, communities and shareholders. Specialty eggs and prepared foods are not promises for tomorrow. They are delivering today and will continue to improve quality of earnings and lead to margin expansion."

🎯 Capital Allocation Framework (5 Lenses): (1) Dividends: $1.37/share Q1 payable Nov 13 under variable policy, (2) Share Repurchases: Opportunistic approach with $450M remaining of $500M authorization using open market/accelerated/trading plans, (3) EPS Growth: Reinvesting in modernization/efficiency/margin expansion, (4) M&A: Geographic expansion and prepared foods in fast-growing subcategories, (5) Multiple Expansion: Higher quality predictable earnings deserving premium valuation

🚀 Demand Tailwinds Strengthening: FDA now allows "healthy" on egg cartons, American Heart Association recommending eggs for heart-healthy diet, American Academy of Pediatrics recommending eggs conception-to-age-2 for choline, GLP-1 drugs catalyst for protein, 97% of US households buy eggs, eggs lowest cost protein per gram except milk, eggs fit health/convenience/affordability trends, ultra-processed food backlash benefiting eggs

🔮 House of Brands Strategy: Becoming diversified consumer-driven food company with Egg-Land's Best (50%+ of #1 specialty brand), Land O' Lakes, Farmhouse Eggs, 4-Grain, Sunups, Sunny Meadow, Meadow Creek Foods, Crepini reaching consumers across national/regional/private label, "choice" is core strategy producing what consumers want, moving at customers' long-term pace with broad range positioning, maintaining trust through cycles

🚀 Why CALM Bulls Are Right
🦠
HPAI Migration Season Starting
3.1M hens already depopulated since Sept USDA count, migration season "turning volume up" with early indicators birds carrying violent strain, turkey flocks already hit in Northern states earlier than expected, industry at 301M layers vs 340M needed (1 per US person), supply stabilization required before marketing programs effective, "no farm is immune"
🏭
Echo Lake Crushing Expectations
$71M Q1 sales (+800% contribution) with "no buyer's remorse," margins meeting or exceeding all initial projections, $15M+ synergies on track or better, $14.8M pancake line approved adding ~10% capacity demonstrating reinvestment conviction, team executing flawlessly with "mind for growth and perfection," opens new M&A channel in prepared foods
🎯
Mix Shift Accelerating
Specialty + prepared foods now 40% of net sales marking inflection point, specialty $284M +10% with double-digit cage-free/pasture-raised growth, produces 50%+ of Egg-Land's Best (#1 specialty brand), gross margin expanding 220bps to 33.7%, operating margin +320bps to 27%, "house of brands" strategy with Land O' Lakes/Farmhouse/4-Grain/Crepini/Meadow Creek
⚡
Unprecedented Demand Tailwinds
FDA allows "healthy" on egg cartons, American Heart Association recommending for heart health, American Academy of Pediatrics recommending conception-to-age-2 for choline, GLP-1 drugs catalyzing protein demand, 97% US households buy eggs, lowest cost protein per gram except milk, ultra-processed backlash benefiting eggs, high-protein diet trend accelerating
🐻 Why CALM Bears Have Valid Concerns
📉
Seasonality Pricing Pressure
Q1 typically weakest quarter yet delivered strong results suggesting peak cycle, CEO attributes recent price drops to "normal seasonality" after years of disruption, supply stabilization reducing shortage premiums, analyst question on "topside slippage" with CEO acknowledging customer pricing shift toward cost-plus reducing market capture but providing downside protection mid-cycle
⚖️
DOJ Investigation Unresolved
Civil antitrust investigation into potential egg price-fixing remains active and not addressed on earnings call, reputational risk with major retail partners if allegations escalate, past industry settlements reached hundreds of millions in damages, timing and outcome highly uncertain creating overhang despite strong operational performance
🎲
Echo Lake Integration Risk
Only 3 months post-acquisition (closed June 2) with integration still early stage despite strong start, $258M investment in unfamiliar prepared foods category carries execution risk, management acknowledging "exciting meetings planned to drill down on longer term plans" suggests strategy still developing, aggressive $14.8M pancake capex approved quickly could indicate overconfidence
💸
Share Buyback Hesitancy
Only $50M of $500M authorization used despite stock down 24% from July highs, management calling approach "opportunistic" but no execution at current levels suggests waiting for lower prices or limited conviction, competing capital priorities (M&A, organic growth, dividends) may limit actual buyback deployment despite authorization

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.