Cal-Maine Foods has egg on its face after a disappointing first quarter

Cal-Maine Foods Inc (NASDAQ:CALM) shares slumped after lower-than-expected fiscal first-quarter earnings and a slashed quarterly dividend.

The egg producer reported earnings of $0.26 per share on revenue of $340.6 million compared with $0.33 on revenue of $262.8 million in the previous year’s first quarter.

The Mississippi-based company fell below Wall Street estimates of $0.49 EPS on revenue of $350.5 million.

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Shares of the company sank nearly 9% to $44.15 in Monday pre-market trading.

Cal-Maine produces specialty eggs, such as nutritionally-enhanced, cage-free, organic and brown eggs. Its brands include Egg-Land’s Best, Land O’ Lake, Farmhouse and 4-Grain.

The net average selling price per a dozen eggs rose to $1.30 from $1.01.

Feed costs jumped more than 10% to $0.41 from $0.37.

Cal-Maine said it expects an increase in demand for cage-free eggs as grocers and restaurants move away from conventional eggs. The company is renovating facilities to be more flexible, allowing them to produce both conventional and cage-free eggs.

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“Although overall egg production growth has been modest, according to recent USDA reports, the number of chicks hatched has increased 11 percent since the beginning of calendar 2018, indicating future increases in laying hen numbers,” said CEO Dolph Baker in the company’s press release.

“Given these trends, the potential increase in the shell egg supply could create additional pricing pressure,” he added.

Cal-Maine’s dividend policy pays investors one-third of quarterly income, so a drop in net income translates to a lower dividend for its shareholders.

The company cut its quarterly dividend to $0.085 per share compared with $0.375 per share in its fiscal fourth quarter.

Story by ProactiveInvestors