Cal-Maine Foods, a large producer of eggs, is the IBD Stock Of The Day. With quarterly earnings due next week, CALM stock is setting up in a base and recently broke past an early entry.
Those results will arrive as egg prices soar following a bird-flu outbreak that has depleted the chicken population.
More broadly, food producers have held up relatively well in this year's bear market. Food and consumer staples are generally seen as defensive sectors in weak markets.
CALM Stock
Shares of Cal-Maine rose 0.3% to 53.17 in the stock market today. CALM stock is in a cup base with a 60.05 buy point.
The stock last week also broke a downward-sloping trendline that began when that base was formed, making for an early entry. It's possible CALM stock will form a handle here, lowering the official buy point. But so far it's wedging higher in light volume over the past several days.
In any case, investors should likely wait until after the company reports fiscal fourth-quarter earnings on Tuesday before taking any action on CALM stock.
CALM stock has a 98 Composite Rating. Its EPS Rating is 45.
The relative strength line for CALM stock is already at a high. The RS line, the blue line in the chart provided, tracks a stock's performance vs. the S&P 500 index.
Cal-Maine runs production facilities, mills and breeding facilities to produce eggs.
Wall Street expects the company to earn $1.84 per share, reversing a loss a year ago. Sales were expected to jump 64% to $576 million, helped by a big gain in the average selling price of eggs. That would be the fourth-straight quarter of accelerating revenue growth.
For fiscal 2022, Cal-Maine earnings are seen surging to $2.30 a share vs. 4 cents in 2021, snapping a three-year streak of declining profits.
Egg Prices To Rise
Analysts expect the average selling price for Cal-Maine's eggs to come in at $2.13 per dozen during the quarter. That's up from $1.25 a year ago. During the third quarter, those prices rose 29.4%.
The Agriculture Department expects egg prices to rise 19.5%-20.5% this year. More broadly, the USDA expects the price of food consumed at home to rise 8.5%-9.5% in 2022.
Food prices have risen as harsher weather constrains the output of crops, which are needed for grocery-store items and animal feedstock. Russia's invasion of Ukraine has lifted the price of the fuel needed to ship those goods, as well as the natural gas used to make nitrogen fertilizer.
A bird-flu outbreak provided a further boost to egg prices by limiting the supply of hens.
Cal-Maine CEO Dolph Baker, during a conference last month, said the company took steps like sanitizing vehicles and worker clothing and footwear. He said none of its production facilities had yet been affected by the outbreak, which began in February.
Cal-Maine controls roughly 19% of the U.S. market for shell eggs, Baker said.
Demand for eggs typically hits a lull between Easter and Labor Day. But Baker said, "We have not seen any disruption in demand. There are a lot of choices for retailers or retailer customers with specialty eggs and conventional eggs."
He also downplayed the impact of rising egg prices on consumer demand.
"Eggs are stable," he said. "People buy them. Our experience is, they buy them whether they're $3 (a dozen) or 70 cents."
