Monday, July 27, 2009

Cal-Maine misses big, trading down 9% (CALM)

AlphaNinja - Shell egg producer Cal-Maine (CALM) reported earnings of 43cents per share, far below the consensus estimate of $1.13.

Reduced shell egg pricing was partially offset by lower feed costs, but not enough to prevent a huge decline in gross margin, operating income, etc:

If you took this quarter's earnings as the "run-rate" for the year you'd arrive at 1.72 in earnings, and maybe $45mil in Free Cash Flow, for an FCFY (Free Cash Flow Yield) of 6.5% -->> FAR too low for a company with such volatile earnings. That's a dire view, but worth considering.

That volatility in earnings estimates is why I stayed away from shares when writing about the stock in May - not because I didn't like the company, but because I wanted a higher yield to compensate for big risks to earnings. That said, the stock is still up 25% from those levels.

I'll update again after talking to management (great management by the way), but am not interested in CALM unless it falls back near $20.

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