Cal-Maine Foods saw its net income increase more than threefold and its sales increase 12 percent during the first quarter of fiscal year 2015, but some analysts are skeptical that the largest egg producer in the United States can retain that kind of financial strength.
“While the valuation looks appealing based on the current metrics and long-term reported growth, the current operating conditions appear not sustainable as high egg prices and lower feed costs will undoubtedly result in a built-up capacity, thereby hurting future prices,” a Seeking Alpha analyst wrote.
Cal-Maine Foods on September 29 released the financial results of its first quarter ending August 30, citing its net income jumped from $8.8 million for the first quarter of 2014 to $27.7 million. The net income per share was $1.14 per diluted share, three cents below analysts’ expectations.
Dolph Baker, the company’s president and CEO, noted that Cal-Maine Foods is optimistic about its outlook for the remainder of the fiscal year, but also provided words of caution, citing that USDA reports indicate the national layer flock is at a record high level, possibly increasing the future egg supply and putting downward pressure on egg prices.
California’s Proposition 2, which will take effect January 1, 2015, makes it unlawful to house layer hens in battery cages, potentially impacting the U.S. egg industry as a whole.