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Cal-Maine Foods Rises 5% as Strong Retail Sales Boost 2Q Earnings

Shares of Cal-Maine Foods jumped 5.3% in Wednesday’s pre-market trading session as the company crushed analysts’ estimates for the second quarter of fiscal 2021, ended Nov. 28.

The company’s 2Q sales grew 11.5% year-over-year to $347.3 million, exceeding analysts’ expectation of $333.5 million. Cal-Maine (CALM) attributed the top-line growth to favorable demand trends for shell eggs mainly at the retail level as consumers continue to cook more at home during the current health crisis.

However, Cal-Maine stated that demand from foodservice channels has been less consistent and remains well below pre-pandemic levels, owing to various restrictions on restaurants in different areas of the country.

Meanwhile, strong sales helped the company to flip to EPS of $0.25 in 2Q FY21, from a loss per share of $0.21 in 2Q FY20. Analysts were expecting a loss of $0.08. (See CALM stock analysis on TipRanks)

CEO Dolph Baker stated, “While we are still facing an uncertain environment, we believe retail demand for eggs will remain strong, and we are optimistic that effective vaccines will soon be widely available, restoring consumer confidence and allowing restaurants and food service operators to resume regular schedules.”

The company also expects continued volatility in feed costs for the remainder of FY21 as higher export demand for both soybeans and corn is putting pressure on domestic supplies.

Additionally, Cal-Maine cautioned that market prices for its primary feed ingredients could also be impacted by the ongoing uncertainties and supply chain disruptions associated with the COVID-19 pandemic, weather fluctuations and geopolitical issues surrounding trade agreements and international tariffs.

Recently, Stephens analyst Ben Bienvenu lowered the price target on Cal-Maine to $47 from $55 but reiterated a Buy rating. In a note to investors, Bienvenu stated that the company’s operating environment “remains volatile” as retail demand remains strong, while foodservice and institutional demand continues to be weak.

Nonetheless, Bienvenu said that the recent vaccine developments are favorable for the pricing outlook and the stock’s valuation remains attractive.

Overall, Cal-Maine scores the Street’s Moderate Buy analyst consensus based on 2 Buy ratings. The average price target of $47 suggests that shares could rise 26.1% from current levels. Shares fell about 12% in 2020.

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