It is no newsflash that the price of eggs has skyrocketed in recent months — certainly, every trip to the supermarket is a stark reminder.
In January alone, the price of eggs rose 15.2%, the highest increase since June 2015, according to the latest Consumer Price Index. And over the past 12 months, the price of eggs has jumped 53%, according to the CPI.
The primary reason is an outbreak of bird flu that has decimated the hen population, which, in turn, has led to fewer eggs being produced, and higher prices for those eggs.
The nation’s largest producer of eggs, Cal-Maine Foods (NASDAQ:CALM), saw huge revenue gains over the past year, as it was able to meet customer demand.
“Our team did an outstanding job in managing our production as well as making outside purchases in order to meet the needs of our valued customers,” Cal-Maine President and CEO Sherman Miller said. “We were fortunate to have the ability to leverage our significant scale and benefit from recent acquisitions, which have helped support our production capacity in this challenging supply environment.”
Overall, the company sold 329.8 million cartons of eggs for the quarter ended November 29, 14% more than the same quarter a year ago. The net average selling price per dozen rose 58% to $2.74.
That led to an 82% year-over-year increase in net sales to $955 million. Net income jumped to $219 million, or $4.47 per diluted share, up from $17.0 million, or 35 cents per share, for the same fiscal quarter a year ago.
When to expect egg prices to drop
Cal-Maine stock rose about 87% in 2024 and over the past 12 months it has gained roughly 59%, currently trading at $91 per share. However, it is down about 11% year-to-date and 14% over the past month, as the bird flu outbreak continues.
The big issue for Cal-Maine is if it can continue to meet demand in this challenging market. The company has invested in its production operations through acquisitions and expanding its cage-free capacity.
“Without question, we have recently faced significant challenges within our Company and the entire egg industry due to the ongoing outbreaks of HPAI,” Miller said. “While we recognize and address these risks, we are steadfast in our efforts to effectively manage our operations and promote responsible and sustainable production. We remain focused on optimizing the aspects of our business that we can control and continue to extend our leadership role in supporting the nation’s food supply."
Also, experts predict that the price of eggs will gradually come down in 2025. The USDA projects the average price for a dozen eggs to fall from $4.80 in Q1 to $2.50 in Q2. In Q3, prices will fall even further to about $2.10, followed by projections of $2.35 per dozen in Q4. So, prices should start to normalize. However, these projections remain fluid, depending upon the continued impact of the bird flu on populations.
Can Cal-Maine stock keep rising?
Cal-Maine stock is extremely cheap, with a P/E ratio of 7. But the question is, will it have the type of earnings power and revenue generation it saw in 2024? It is very difficult to know, given the unpredictability of the bird flu.
The two analysts that cover it have a median price target of $98 per share, which would be about a 7% increase. That may not be a bad return in 2025, as the overall market should be more volatile.
The stock probably won’t see the type of returns it saw last year, but it has been a steady stock over the years, with a 10-year average return of 9.4%. It is also a market leader and very cheap right now. However, it may be a good idea to wait a month or so until the next earnings report comes out.