CAL-MAINE FOODS INC (CALM)·Q3 2020 Earnings Summary

Executive Summary

• Returned to profitability despite soft pricing: net sales $345.6M (-10.0% y/y) and GAAP EPS $0.28 vs $0.82 y/y; up from Q2’s loss of $(0.21), driven by lower feed costs and stable volumes amid weak conventional pricing .
• Mix/price: Specialty eggs were 35.0% of sales dollars (ex co-pack) with ASP $1.89/doz (-3.4% y/y); overall net ASP declined 10.0% y/y; dozens sold were flat (-0.2% y/y), underscoring pricing as the primary headwind .
• Post-quarter setup positive: management said conventional market egg prices moved “significantly higher to record levels” after quarter-end, implying a Q4 tailwind; COVID-19-era demand and Easter seasonality were cited later in FY20 commentary .
• Dividend withheld under variable policy due to cumulative losses of $61.9M through Q3; operations running normally with no supply chain disruptions reported at the time; company provided supplemental pay to employees amid COVID-19 .

What Went Well and What Went Wrong

• What Went Well

  • Profitability inflected: operating income $5.2M and net income $13.7M in Q3 after Q2 loss, supported by farm production cost per dozen down 1.6% and feed costs down 3.6% y/y. Quote: “Our operations ran well… farm production costs per dozen were down 1.6%… feed costs [down] 3.6%” .
  • Supply backdrop improving: USDA hen numbers down to 330.0M (-11.8M y/y) and hatch rates down for three consecutive months through Feb-2020, a constructive sign for pricing. Quote: “Hen numbers… were 330.0 million… 11.8 million less… hatch rates decreased 4.95%… including 8.0% in February” .
  • Strategic investment continues: cumulative cage-free capex >$344M with expansions in FL/TX/UT to meet state mandates and customer demand. Quote: “We have invested over $344 million to expand our cage-free production… expansion projects underway in Florida, Texas and Utah” .

• What Went Wrong

  • Pricing pressure: Southeast large conventional price -13.8% y/y; company net ASP -10.0% y/y, driving a 10.0% revenue decline despite flat volumes. Specialty dozens down 7.1% due to low conventional prices pressuring mix .
  • Specialty softness: specialty ASP -3.4% y/y to $1.89/doz; specialty dozens -7.1% y/y; specialty dollars still 35% but down from $131.1M to $117.7M .
  • Customer loss (prior quarter): in Q2, CALM lost a portion of non-specialty volumes to a major Southeast customer (4.6% of FY19 shell egg dozens; 6.1% of non-specialty dozens), raising utilization and mix risks while network is optimized; management is decommissioning older facilities to offset .

Financial Results

• Income statement highlights and EPS versus prior periods

• Margins

• Operating KPIs and pricing

• Estimates comparison
  • S&P Global consensus estimates were not retrievable due to a request limit at the time of query; therefore, we do not present “vs. consensus” deltas for Q3 2020. Values from S&P Global were unavailable.

Guidance Changes

Earnings Call Themes & Trends

Note: We did not locate a Q3 FY2020 earnings call transcript in our document set; themes reflect management commentary across quarterly press releases.

Management Commentary

• “Our results… reflect more challenging market conditions… However, we were pleased… to return to profitability for the quarter… While our sales volumes were in line with last year, our overall sales revenue was down due to the lower average selling prices…” .
• “Since the end of the third quarter, market prices have moved significantly higher to record levels, and we expect to see continued price volatility through the end of our fiscal year.” .
• “Our operations ran well during the third quarter… farm production costs per dozen were down 1.6 percent… feed costs [down] 3.6 percent…” .
• “We have invested over $344 million to expand our cage-free production… expansion projects underway in Florida, Texas and Utah…” .
• COVID-19: “Facilities are operating normally… we have not experienced any supply chain or delivery disruptions… we are providing supplemental pay to all of our employees…” .

Q&A Highlights

• No Q&A highlights are available from our document set; we did not locate a Q3 FY2020 earnings call transcript or related Q&A materials in the filings or press releases reviewed (8-K and Exhibit 99.1) .

Estimates Context

• We attempted to retrieve S&P Global (Capital IQ) consensus for Q3 FY2020 (EPS and revenue) but could not due to a platform request limit at the time of query; as a result, we do not present “vs. consensus” variances for this quarter. We did not substitute third-party estimates to maintain consistency with the stated methodology. S&P Global consensus data was unavailable at query time.

Key Takeaways for Investors

• Pricing is the swing factor: Q3 profitability returned despite weak conventional prices; management flagged record post-quarter price levels, creating a positive near-term setup into Q4 amid COVID-driven at-home demand and Easter seasonality .
• Mix sensitivity persists: specialty dozens fell 7.1% on low conventional pricing, pressuring specialty mix; watch relative price spreads for mix recovery as conventional prices normalize higher .
• Cost discipline supports downside: farm production costs/doz down 1.6% and feed down 3.6% y/y provided cushion; continued vigilance needed given tariff/COVID-related volatility risk to grain inputs .
• Capacity and compliance positioning: >$344M invested in cage-free capacity with ongoing projects (FL/TX/UT) aligns with state mandates and retailer commitments; positions CALM for secular specialty growth .
• Dividend on hold under policy: no Q3 dividend and $61.9M cumulative losses to recover; a sustained return to profitability would be prerequisite to resume payouts, making Q4 trajectory critical .
• Customer/channel optimization: prior loss of non-specialty volumes in Q2 highlights concentration risk; management is decommissioning older facilities and integrating acquisitions to optimize footprint .