Cal-Maine Foods Q1 2027 Earnings Call: Complete Transcript

Cal-Maine Foods (NASDAQ: CALM ) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Cal-Maine Foods, Inc.

3 million in the prior year. The company is experiencing pressure from an oversupplied egg market, leading to lower conventional egg prices, while maintaining confidence in the long-term demand for eggs, especially specialty eggs. Strategically, Cal-Maine is focused on expanding its specialty shell eggs and prepared foods segments, with a planned 60% increase in prepared foods production capacity by the first half of FY2028. Cal-Maine is investing heavily in its prepared foods business, expecting new production capacities for high-speed pancake lines and scrambled egg production to come online, which will gradually contribute to earnings.

6 million in cash and temporary investments, enabling it to continue investing in growth despite current market challenges. Management highlighted the importance of long-term growth strategies over short-term market fluctuations, emphasizing diversification and scaling of operations as key priorities. 9 million post-quarter, reflecting confidence in the company's valuation despite current low stock prices. The company does not provide specific guidance but acknowledges the challenges of high feed costs and market volatility, expecting some stabilization as supply-demand dynamics evolve.

Full Transcript OPERATOR Good morning, everyone, and welcome to the Cal-Maine Foods, Inc. First Quarter Fiscal Year 2027 Earnings Conference Call and webcast. Joining us today are Sherman Miller, President and CEO; Max Bowman, VP and CFO; Keira Lombardo, Chief Strategy Officer; and John Zoeller, CFO Prepared Foods. All participants are in a listen-only mode.

After today's prepared remarks, there will be a question-and-answer session. At that time, I'll provide instructions for those wishing to ask a question. Please note this call is being recorded. I will now turn the call over to Sherman.

Please go ahead. Sherman Miller, President & Chief Executive Officer Good morning. Thank you for joining us today. I want to remind everyone that today's remarks may include forward-looking statements.

These are based on management's current expectations and are subject to risks and uncertainties described in our SEC filings. I'd like to begin with a question we believe is most important as we look at Cal-Maine from this point in the cycle. How does the earnings power of the company evolve from here? There are really two timing questions underneath that.

The first is when the conventional shell egg market begins to rebalance. The second is when the investments we are making in prepared foods translate into greater earnings contribution. Starting with conventional eggs. The market remains oversupplied, which continues to put downward pressure on wholesale prices.

The key question is the timing of rebalancing. There are some early indicators worth watching. S. layer flock at approximately 336 million to 343 million birds, roughly 4 million below its previous estimate.

AEB also reports that August hatch numbers are down approximately 12% year over year, and the cancellations are becoming more common. 9 million cases per month over the last three months, a slight reduction from its prior report. These indicators do not establish that the market will turn, but they provide important context on the potential direction of supply. HPAI could also affect the timing of when supply rebalances with demand.

As shown on slide 9 of our earnings presentation, activity has historically increased with fall wild bird migration. Although timing and severity vary by year, we're approaching the period when the historical curve is typically turned upward. While a meaningful layer outbreak could tighten supply and support egg prices because relatively small changes in supply can have an outsized market impact, the healthier, more sustainable outcome is for normal industry economics to work. Our focus remains on rigorous biosecurity to protect our flocks and reduce exposure.

Importantly, we do not see structural weakness in egg demand. The data remains constructive across retail, foodservice and export. According to NielsenIQ, calendar year to date through August, measured retail egg volume increased approximately 4%. More recently, in the four weeks ended August 29, 2026, national retail dozens remained slightly positive year over year even as average price per dozen declined approximately 27%.

Portability and greater promotional activity should provide additional support to consumption as we move into the seasonally stronger baking and holiday periods. The demand trends within specialty shell eggs are particularly constructive. S. cage free, organic, free range and pasture raised dozens sold at retail increased approximately 6%, outpacing the approximately 4% growth of the overall egg category.

We are also seeing healthy demand beyond retail. 4% year to date through July, representing approximately 69 million incremental egg servings. S. egg export volume increased approximately 29% year to date, with July representing the highest monthly export volumes since May 2023.

More fundamentally, eggs remain exceptionally well positioned against durable consumer trends around protein, nutrition, convenience, simple ingredients and value. Taken together, this gives us confidence in the long-term demand foundation even as supply and demand work back toward balance. That brings us to the more important point for Cal-Maine. The current cycle needs to be viewed in the context of how much the company has already changed.

The transformation is not prospective, it's already visible in our mix. What comes next is scaling the earnings contribution. During the first quarter, specialty shell eggs and prepared foods represented approximately 54% of net sales, including approximately 12% for prepared foods. Conventional shell eggs remain foundational to Cal-Maine.

Our scale, vertically integrated operating model, customer relationships and national distribution capabilities are significant competitive advantages and the business has demonstrated substantial cash-generating capacity through the cycle in the past. Specialty shell eggs broaden that foundation. Our ability to serve consumers across communities—conventional, cage free, nutritionally enhanced, organic, brown, pasture raised and free range eggs—is an important competitive advantage. It allows us to participate across price points and consumer preferences rather than relying on any single segment of the category.

Specialty shell eggs and our cost-plus and hybrid pricing structures also create a more diversified economic profile. They do not eliminate commodity exposure, but we believe they reduce the extent to which daily conventional wholesale egg prices alone impact Cal-Maine's earnings potential. Prepared foods takes that diversification further and brings us to the second major timing question. When will the investments we are making translate into greater earnings contribution?

This is a multiyear capacity and commercialization build. Investment, commissioning and startup costs necessarily precede full utilization and earnings contribution. The question is not simply when capacity comes online, it's how quickly we convert that capacity into customer demand, utilization, fixed cost absorption and profitable growth. We expect prepared foods production capacity to increase by more than 60% by the first half of fiscal 2028 compared to the end of fiscal 2026.

Our high-speed pancake line is expected to add approximately 12 million pounds of annual production capacity through early fiscal 2027. Our network optimization expansion project is expected to add approximately 17 million pounds of annual scrambled egg production capacity through fiscal 2027. In Crepini, our investment is expected to add approximately 18 million pounds of additional production capacity progressively through fiscal 2028. Those projects are complemented by the additional $54 million of prepared foods capacity investments we announced last quarter.

The Echo Lake, Crepini, Creighton Brothers and Van's acquisitions have broadened our capabilities, customer base and routes to market. The next phase is increasingly about scaling those platforms and converting the increased production capacity we're building into profitable growth. Importantly, the addressable opportunity extends well beyond breakfast. S.

retail sales. But our broader opportunity is egg-based prepared foods across multiple meal occasions and day parts, including breakfast on the go, snacking after school and convenient meals. Our strategy is to leverage our capabilities in eggs and protein across a larger set of products, customers, channels and consumer occasions. Capacity comes first.

Commercialization and customer demand follow. Earnings contribution builds as volume scales, utilization increases, fixed costs are absorbed and operations mature. That progression is important to understanding both where our earnings are today and the earnings power we're building. With that, I'll turn the call over to Max to review our first quarter financial results.

Max Bowman, Chief Financial Officer Thanks, Sherman, and good morning, everyone. Earlier this morning we issued our quarterly earnings release and filed our Form 10-Q for the first quarter of fiscal 2027. We also posted a supplemental first quarter earnings presentation to our website that provides additional details on our performance for the first quarter. 5% compared with the prior-year period.

3 million in the prior-year period. 2%. 12. 2%.

5% compared with the prior-year period. 2%. Price realization for external customers, which we define as our average conventional shell egg selling price relative to the daily average Urner Barry Southeast Market price, was 99% in FY27 Q1 compared with 101% in FY26 Q4. The primary driver of the change was market timing.

Much of our conventional business is priced back of the market, and our selling prices moved with a lag in Q4. The Urner Barry market declined rapidly, which benefited realization as our selling prices lagged the market down towards the end of Q1. The market rose rapidly in late August, creating the opposite effect as our selling prices lagged the market. Our pricing approach has not changed; the direction and timing of the market did.

Customer pricing arrangements, including cost-plus and hybrid structures, remain intact, and realization remains historically strong. Sales mix and egg donations during the quarter also contributed to the slight sequential decline in price realization. Despite the slight sequential decline, price realization remained above historical levels achieved before the pricing structure changes, demonstrating that our strategy continues to work as intended. 9 million, down 14% compared with the prior-year period.

3%. The year-over-year decline reflects an unusually strong prior-year period when we strategically stepped in to supply customers during industry-wide shortages. That decision reinforced our position as a reliable supplier of choice and kept our brands on shelf when supply was constrained. As the comparison normalizes, we expect growth to more closely align with the broader market.

Prepared foods generated net sales of $63 million, down 13% compared with the prior-year period. 4%. 5 million in the prior-year period. 9 million in the prior-year period.

4% in the prior-year period. Turning to cash flow and the balance sheet. 6 million in the prior-year period. S.

for $25 million during the quarter. 6 million and remain virtually debt free. During the quarter, we repurchased 66,601 shares of our common stock under our share repurchase program for approximately $5 million. 7 million remained available at quarter end.

9 million. Pursuant to our variable dividend policy, we will not pay a cash dividend until we are profitable on a cumulative basis. 5 million. With that, I'll turn the call back to Sherman for closing remarks before we begin the Q and A session.

Sherman Miller, President & Chief Executive Officer Thanks, Max. As we look ahead, I want to come back to those two timing questions, because they are central to understanding both our near-term results and the longer-term opportunity. The first is the shell egg cycle, as outlined in slide 8. Near-term results will continue to reflect low conventional wholesale egg prices, higher input costs, and the current supply imbalance.

Market timing also affects how changes in conventional pricing flow through our results. Much of our conventional business is priced back of the market, meaning changes in the daily average Urner Barry market price flow through our realized selling prices with a lag. When the market falls rapidly, our realized prices can temporarily remain above the current market. When the market rises rapidly, our realized prices can temporarily lag the market.

Our pricing approach has not changed; the direction and timing of the market have. We are not attempting to call the precise bottom in the conventional egg cycle. What we do see are early supply indicators worth watching against the demand backdrop that remains healthy. Retail volume is growing.

Specialty shell egg sales are outpacing the broader category, QSR egg servings are up, and exports have strengthened significantly. S. egg exports increased 25% during the first half of 2026, consistent with the strengthening export trend reflected in the more recent data. The issue today is that supply remains greater than even that healthy demand can absorb.

That distinction is important. The second timing question is different, because it is much more directly connected to our own execution in prepared foods. We have considerably greater visibility in the investments we are making, the capacity being added, and the commercial opportunities we're pursuing. Our focus now is increasingly on commercialization, customer demand, utilization, and converting that additional capacity into profitable growth.

That means current earnings reflect two things happening simultaneously: a difficult point in the conventional egg cycle, and investment ahead of the full earnings contribution from prepared foods. Neither, viewed in isolation, fully describe the longer-term earnings power we're building. That is why the strength of our balance sheet is particularly important at this point in the cycle. We ended the quarter with cash and temporary cash investments of approximately $768 million and remain virtually debt free.

That financial strength allows us to continue investing organically, execute our prepared foods capacity roadmap, and pursue strategically aligned M&A without depending on near-term recovery in conventional egg prices. Rather than retrenching when commodity economics are weak, we have the financial capacity to invest through the cycle. That gives us the opportunity to emerge from this part of the cycle with greater capacity, a broader portfolio, and a more diversified earnings model. There is also an important point about how Cal-Maine's earnings power should be evaluated at this stage in the cycle.