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Bull of the Day: Cal-Marine (CALM)

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In March of this year, Iowa was hit by avian influenza (bird flu), and wiped out over 31 million chickens at a cost of over $1.2 billion dollars. This flu caused a significant rise in egg prices because Iowa is the largest egg-producing state in the Union. Iowa chicken farmers are still rebounding from this loss, and it takes months to reintroduce the new chickens into approved conditions. Further it will take about one to two more years before the farms get back to production levels seen before the flu outbreak.

This has been a boon for egg producers who have seen higher prices and therefore higher profits. One of the largest producers of fresh shell eggs is Cal-Marine Foods ( CALM ). Cal-Marine recently reported Q1 16 earnings and revenues wherein the company posted massive gains across the board. Net Sales improved 70.9% y/y, Net Income jumped +416.2% y/y, and EPS growth improved +421%. Note, that Q1 is typically the company's slowest quarter. Due to these factors, Cal-Marine is the Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) is engaged in the production, cleaning, grading, and packaging of fresh shell eggs for sale to shell egg retailers. The company is the one of the largest producers and distributors of fresh shell eggs in the United States. The company markets its eggs primarily in the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.

In their most recent earnings announcement, Dolph Baker, Chairman President and CEO, stated, "Our financial and operating results for the first quarter marked a very strong start to fiscal 2016 with record quarterly sales and net income. Overall sales were up 70.9 percent over the prior year period, as average selling prices for shell eggs spiked to record levels during the first quarter and were up 65.7 percent compared with the same period last year. Volumes were also up slightly in what is typically our slowest quarter, with total dozen shell eggs sold up 2.8 percent over the first quarter of fiscal 2015."

Increasing Estimates

As you can see in the table below, consensus estimates for Cal-Marine have seen significant boosts after their recent earnings announcement. This has caused future estimates to increase in each time period.

As you can see that estimates have continued to improve month over month, and more specifically over the past 7 days where the company announced their earnings data. Each quarter and year, has seen a sizable boost in expectations suggesting that this growth will be sustained out through 2017.

Bottom Line

It appears that it will take at least 3 more quarters to restock the farms with chickens to their pre-avian flu levels. This gives Cal-Marine almost a full year of higher priced eggs, and therefore a large window for price appreciation. Given Cal-Marine's position as a market leader, they will be able to capture most of the higher priced egg sales.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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