Forget high gas prices. If you've tried to buy eggs lately, you've paid up or done without. But some investors are finding a way to cash in.
Shares of the two largest publicly traded egg producers, Cal-Maine and Vital Farms, are up 39% and 4% in the past 12 months, respectively, says MarketSmith. That's an impressive showing while the S&P 500 is down more than 7% during that time.
Why such interest in eggs? Egg prices are on fire — even more so than oil and gasoline. The price of a dozen grade-A eggs was $4.25 nationally in December 2022, says the Bureau of Labor Statistics, up 138% from the same period a year ago. In some places, like California, eggs sell for even more.
Egg prices are becoming the new poster child for runaway inflation. Millions of hens died last year in an outbreak of disease. That sharply cut the supply of eggs. Cal-Maine is even considered a meme stock now, landing in the Roundhill Meme ETF.
"Energy prices fell 4.5% in December on a 9.4% decline in gasoline prices. Food prices rose 0.3%, with food at home up 0.2% and food away from home up 0.4%," said Bill Adams, chief economist for Comerica Bank. "Egg prices rose 11.1% on the month, pushed higher by an avian flu outbreak that has hurt supply."
Egg Bonanza For Investors
The avian flu's effect on supply will ease, analysts say. But investors who look closely will see that corporate profits at egg companies are booming, too. And that's not seen easing anytime soon.
Just look at Cal-Maine, the Ridgeland, Miss.-based processor of eggs under the Egg-Land's Best, Land O'Lakes and Farmhouse Eggs brands. Profits are sizzling. Adjusted net income per share in fiscal 2022, ended in May, soared 6,700% to $2.72. And this fiscal year profit is expected to jump an additional 430%, says S&P Global Market Intelligence.
No wonder analysts still rate the stock outperform despite its big run. Additionally, analysts think the stock will be trading for 55.50 a share in 12 months. If they're right, that's an additional 2% upside, not including the whopping 10% dividend yield.
Over at Vital Farms, more of the benefits of rising egg prices are to come. Profit in 2022 is seen falling 16% at the Austin, Texas-based pasture-raised egg company. But then it's off to the races. The company's profit is seen jumping 360% this fiscal year and 134% in 2026. Shares rose just 4.8% in the past year, but are up nearly 11% just this year. And analysts think the stock will trade for 18.14 a share in 12 months, or nearly 10% higher than they are now.
Profit is so high for egg producers, there's talk of possible government investigations.
Rally On Breakfast Table Stocks
But there's more. Fanned by inflation, there's been a rally this year in nearly all the stocks involved with filling the breakfast plate.
Shares of the six publicly traded companies that play a key role in parts of the traditional breakfast are up an average of 9.6% in the past year.
Lamb Weston Holdings, a top potato producer, has seen its shares skyrocket nearly 54% in 12 months. And the group of breakfast stocks is up an average of 4.8% this year so far, headlined by Vital Farms' 10.9% rise.
So when you're ready to cough up the big bucks to buy eggs, at least know there's a way to profit, too.
Breakfast Stock Bonanza
Shares of most breakfast-related companies are soaring with the jump in egg prices
| Company | Symbol | 1-year change | Breakfast contribution |
|---|---|---|---|
| Lamb Weston Holdings | 53.7% | Potatoes | |
| Cal-Maine Foods | 39.0% | Eggs | |
| Vital Farms | 4.8% | Eggs | |
| Hormel Foods | -4.0% | Sausage, ham | |
| Pilgrim's Pride | -7.8% | Chicken, pork | |
| Tyson Foods | -28.3% | Pork, chicken, beef | |
| S&P 500 | -7.1% |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
