Bear of the Day: CalMaine Foods (CALM)

Cal-Maine Foods (CALM) is a Zacks Rank #5 (Strong Sell) that is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs.

The stock has been trading sideways since Q1 of last year and investors are getting exhausted over the lack of upside the company has shown. After a recent earnings miss, it might be time to give up on the name and allocate capital elsewhere.

About the Company

The Company is the largest producer and distributor of fresh shell eggs in the United States. Some popular brand names include Land O’Lakes, Farmhouse, Egg-Land’s Best and 4-Grain.

Cal-Maine is headquartered in Ridgeland, Mississippi and employs over 3,000 people. The company was founded in 1957 and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.

CALM is valued at $1.8 billion and has a Forward PE of 34. The company holds a Zacks Style Score of “A” in Momentum Growth, but “D” in Value. That valuation has been a drag and an earnings miss hasn’t helped.   

Q4 Earnings

Cal-Maine reported earnings on December 29th, missing expectations by 93%. On the positive side, revenues came in at $390.9M v the $347.3M from last year. The net average selling price pre dozen was $1.86 v the $1.85 last year.

The company is facing inflationary pressures and trying to manage its costs. Management is focused on running efficient operations, but for now costs are eating into that bottom line.

CalMaine Foods, Inc. Price and Consensus

CalMaine Foods, Inc. price-consensus-chart | CalMaine Foods, Inc. Quote


Estimates for the company are flat the current year. For next year we see a 1% drop over the last 7 days, from $1.01 to $1.00. While this isn’t a big move, its in the wrong direction.

Investors should wait until these numbers start moving the right way before getting back in this stock. And with that, they should make sure the technical aspect is in their favor as well.  

Technical Take

As mentioned above, the stock has been in a sideways pattern, trading from between $34 and $40 since the summer months. However, if you go back even further, we saw a sideways trade between $40-50 for six years.

Price is now below that long-term range, which isn’t a good sign.

After earnings, the stock dropped almost 10%, but then rallied back. It popped back over the declining 200-day moving average and is at highs not seen since August. While this is a positive sign, sellers likely step in at the top of this range, so investors should consider doing the same.

If the stock were to fall below that $34-35 support zone, we could see some further downside. But the takeaway from the technical side is that this stock remains dead money.  

In Summary

Cal-Maine is continuing to frustrate investors by trading sideways and disappointing on earnings. Until this stock can get out its trading range, its best to stay away.

For now, a better option might be The Andersons (ANDE). The stock is a Zacks Rank #1 (Strong Buy) and the company is coming off a 225% EPS beat two months ago.   

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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