Cal-Maine (CALM)

Egg company Cal-Maine Foods (NASDAQ:CALM) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 17.4% year on year to $922.6 million. Its GAAP profit of $4.12 per share was 19.2% below analysts’ consensus estimates.

Company Overview

Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Vital Farms (NASDAQ:VITL) is a publicly-traded competitor. Private competitors include Rose Acre Farms Hillandale Farms, but Cal-Maine’s scale and market share are unique.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $4.40 billion in revenue over the past 12 months, Cal-Maine carries some recognizable products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Cal-Maine grew its sales at an exceptional 27.7% compounded annual growth rate over the last three years. This is a great starting point for our analysis because it shows Cal-Maine’s demand was higher than many consumer staples companies.

This quarter, Cal-Maine’s revenue grew by 17.4% year on year to $922.6 million but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to decline by 29.5% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and indicates its products will face some demand challenges. At least the company is tracking well in other measures of financial health.

Cal-Maine has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 37.7% gross margin over the last two years. Said differently, Cal-Maine paid its suppliers $62.30 for every $100 in revenue.

Cal-Maine’s gross profit margin came in at 33.7% this quarter, up 2.3 percentage points year on year. Cal-Maine’s full-year margin has also been trending up over the past 12 months, increasing by 15.5 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Cal-Maine has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 29.8%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Cal-Maine’s operating margin rose by 17.2 percentage points over the last year, as its sales growth gave it immense operating leverage.

In Q3, Cal-Maine generated an operating margin profit margin of 26.2%, up 2.6 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, Cal-Maine reported EPS of $4.12, up from $3.06 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Cal-Maine’s full-year EPS of $26.01 to shrink by 72.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Cal-Maine has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 22.7% over the last two years.

Taking a step back, we can see that Cal-Maine’s margin expanded by 13 percentage points over the last year. This is encouraging because it gives the company more optionality.

Cal-Maine’s free cash flow clocked in at $233.3 million in Q3, equivalent to a 25.3% margin. This result was good as its margin was 14.9 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Cal-Maine’s five-year average ROIC was 43.8%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Cal-Maine is a profitable, well-capitalized company with $1.25 billion of cash and $106.8 million of debt on its balance sheet. This $1.15 billion net cash position is 27.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. Its adjusted operating income missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $86.27 immediately after reporting.

Updated: December 10, 2025 at 9:58 PM EST

Are you wondering whether to buy Cal-Maine or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Cal-Maine is a rock-solid business worth owning. First of all, the company’s revenue growth was exceptional over the last three years. And while its projected EPS for the next year is lacking, its impressive operating margins show it has a highly efficient business model. On top of that, Cal-Maine’s powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Cal-Maine’s P/E ratio based on the next 12 months is 12.4x. Looking across the spectrum of consumer staples companies today, Cal-Maine’s fundamentals shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $98 on the company (compared to the current share price of $86.18), implying they see 13.7% upside in buying Cal-Maine in the short term.