On Wednesday, Stephens maintained an Equal Weight rating on Cal-Maine Foods (NASDAQ:CALM) with a steady price target of $65.00. The company's third-quarter adjusted earnings per share (EPS) came in at $2.84, narrowly missing Stephens' projection of $2.88 but surpassing the consensus estimate of $2.45. The reported GAAP EPS for the quarter was $3.00, which included a gain related to involuntary conversions, specifically payments from the USDA for depopulation efforts.
Adjusted EBITDA for the quarter reached $217.8 million, slightly above the anticipated $216.0 million by Stephens and consensus estimates. The discrepancy between the expected and actual EPS was attributed to a combination of factors. Lower gross margin contributed a $0.32 decrease to the EPS, and higher selling, general, and administrative (SG&A) expenses further reduced EPS by $0.07. These were partially balanced by a $0.19 increase from other income, a $0.11 boost due to a lower tax rate, and marginal increases from higher revenue and depreciation & amortization expenses.
Cal-Maine Foods experienced a slight deviation in pricing from Stephens' estimates, reporting slightly lower figures, while volume sales were higher than expected. Feed costs for the quarter were above Stephens' projections, which impacted the gross margin, although other costs came in slightly under expectations.
The firm has decided to maintain its current stock rating and price target for Cal-Maine Foods, indicating a neutral stance on the stock's outlook. The target price of $65.00 remains unchanged following the assessment of the company's latest financial performance.
InvestingPro Insights
As Cal-Maine Foods (NASDAQ:CALM) navigates the market, it's notable that the company holds a position of financial strength with more cash than debt on its balance sheet. This is a reassuring sign for investors concerned about long-term stability and resilience, particularly in uncertain economic times. Additionally, Cal-Maine has a consistent record of rewarding shareholders, having raised its dividend for 3 consecutive years, which could be attractive for income-focused portfolios.
From a valuation perspective, Cal-Maine's P/E Ratio stands at 6.59, with an adjusted P/E Ratio for the last twelve months as of Q2 2024 at 6.38, suggesting the stock may be trading at a low earnings multiple. This could indicate that the stock is potentially undervalued compared to its earnings, which might pique the interest of value investors. Moreover, the company's strong free cash flow yield is implied by its valuation metrics, hinting at the potential for efficient capital allocation and the possibility of future investments or shareholder returns.
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