On Tuesday, Goldman Sachs maintained a Sell rating on Cal-Maine Foods (NASDAQ:CALM), while increasing the price target to $55 from $53. This adjustment comes in light of the company's anticipated first-quarter earnings for fiscal year 2025.
The firm has revised its earnings per share (EPS) estimate upward to $3.53 from the previous $2.79, a figure that stands significantly above the Refinitiv consensus of $1.72. The revision is primarily attributed to the recent spike in egg prices following the High Pathogenic Avian Influenza (HPAI) outbreaks in July, which impacted approximately 3.1 million layers in Colorado.
Despite the raised EPS estimate, the analyst noted a sharp decline in egg prices this week, with costs dropping to $2.95 per dozen from $4.22. The fluctuation in egg prices is largely due to the unpredictable nature of HPAI outbreaks. However, it is expected that the commodity egg prices will continue to fall in the absence of further outbreaks in the near term. This projection is based on typical seasonal patterns and recent inventory data that indicates a return to average levels.
The firm's stance on the stock remains cautious, with the belief that the risk/reward balance is not favorable at the current valuation levels. The increase in the price target to $55 is justified by the potential for higher near-term earnings and additional cash generation. Nevertheless, the Sell rating stands firm as the market approaches the company's forthcoming earnings report.
In other recent news, Cal-Maine Foods, a major producer and distributor of fresh shell eggs, has seen some noteworthy developments. The company reported a slight dip in its fourth-quarter net sales for fiscal 2024, totaling $640.8 million, which fell short of analyst predictions of $644.73 million. The adjusted earnings per share (EPS) for the quarter were also below analyst forecasts, coming in at $2.32 instead of the projected $2.38.
Despite this, Cal-Maine Foods announced a net income of $113.2 million for the fourth quarter, marking a slight increase from the same period the previous year. For the entire fiscal year, the company's net sales amounted to $2.3 billion, with a net income of $277.9 million, representing a significant decrease from the prior fiscal year's $3.1 billion in net sales and $758.0 million in net income.
In another major development, Cal-Maine Foods announced a strategic investment in Crepini LLC, forming a new joint venture aimed at egg products and prepared foods. The company has invested approximately $6.75 million for a 51% stake in the newly formed Crepini Foods LLC. This move aligns with Cal-Maine Foods' growth strategy to diversify its product mix and expand its egg products business.
Cal-Maine Foods also made strategic acquisitions, including the assets of Fassio Egg Farms and facilities previously operated by Tyson Foods (NYSE:TSN). The company continues to focus on expanding its production capacity for specialty and cage-free eggs to meet consumer demand trends. Lastly, Cal-Maine Foods will pay a cash dividend of approximately $0.77 per share for the fourth quarter of fiscal 2024.
InvestingPro Insights
As investors consider the recent analysis by Goldman Sachs on Cal-Maine Foods (NASDAQ:CALM), it's beneficial to incorporate some real-time data and insights from InvestingPro. The company's market capitalization is currently $3.44 billion. With an adjusted price-to-earnings (P/E) ratio of 12.32, Cal-Maine Foods is trading at a low earnings multiple, which could be appealing to value-oriented investors. Additionally, the company has been able to maintain a gross profit margin of 23.28% over the last twelve months as of Q4 2024, demonstrating its ability to retain a significant portion of revenue after accounting for the cost of goods sold.
InvestingPro Tips highlight that Cal-Maine Foods has a solid financial foundation, holding more cash than debt on its balance sheet, and has raised its dividend for three consecutive years. This underscores the company's commitment to returning value to shareholders and its financial stability. Moreover, the stock has delivered a strong return over the past year with a price total return of 55.25%, showcasing its robust performance in the market.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/CALM. These tips could provide deeper insights into Cal-Maine Foods' financial health and market potential, offering valuable context as the market anticipates the company's upcoming earnings report.
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