Eggs Are Cheap Again

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You've probably noticed that egg prices have swung all over the place the last 2-3 years:

But have you ever wondered who was profiting from those higher egg prices? The primary beneficiary is Cal-Maine Foods (Nasdaq: CALM), the largest egg producer in the U.S., selling about one in every four eggs Americans eat.

Because Cal-Maine doesn't hedge the price of eggs, its prices rise and fall with the market. Those swings come from avian flu, which has been culling U.S. laying hens in waves since 2022 and tightening supply.

That turned FY2025 into the most profitable year in the company's history. Cal-Maine earned $278M in FY2024 and $1.2B in FY2025, then watched profit fall back near $50M by its February 2026 quarter as prices dropped:

The stock made the same trip, from the $40s in 2023, to ~$116 in mid-2025, to ~$77 today (down 34% from its high):

At ~$77, Cal-Maine trades at 5.4x trailing earnings, 2.6x EV/EBITDA, and 1.4x book, with a 10.3% dividend yield, $1.15B of net cash, and almost no debt.

However, those figures all lean on a profit level that's already gone. On forward consensus estimates, the P/E is ~20x, EV/EBITDA is ~7.6x, and the dividend falls toward a 2% yield.

So this write-up focuses on what Cal-Maine earns in a normal year, once avian flu stops setting the price of eggs, and what investors should pay for a dominant, cash-generating egg producer coming off its record year.

Cal-Maine (CALM) is the largest producer and distributor of fresh shell eggs in the U.S. In FY2025 it sold about 1.3 billion dozen eggs, ~24% of everything Americans ate, from a flock of 48.3 million laying hens across about 50 operating locations.

It got that big largely by buying up smaller producers, 25 of them over the past 35 years, and there are plenty more to buy.

For context, the ten biggest egg companies combined own only ~54% of US laying hens (per CALM’s 10-K), with the rest spread across small, family-run farms.

Its products climb a price ladder, and moving up that ladder is the whole strategy:

About 86% of shell egg sales go to retail (grocery chains, club stores, and supermarkets), and ~13% to foodservice (restaurants, cafeterias, and other away-from-home channels).

Walmart, including Sam's Club, was 33.6% of net sales in FY2025. No other customer is above 10%.

Cal-Maine sells most of its eggs at wholesale prices it doesn't hedge, so when supply tightens, the gains flow almost straight to profit. Over the past few years, avian flu has been the primary cause of that tightening.

The disease forces producers to cull entire infected flocks. Cal-Maine's filings put the national cull at 40.2 million commercial layers in 2024 and 45.2 million in 2025.

In March 2026, Cal-Maine had to cull about 350,000 of its own young hens at a Maryland facility, its first direct hit in over a year.

Fewer hens means fewer eggs, higher prices, and, for the producers still standing, much fatter margins.

That's how FY2025 became a record. Net sales reached $4.3B, gross profit $1.9B, and net income $1.2B.

Those record prices also drew legal scrutiny. Cal-Maine received a DOJ civil investigative demand over egg pricing in March 2025, faces private class actions alleging the major producers coordinated prices, and its own filings note a similar Washington State subpoena in March 2026.

But then supply recovered. In its Q3 results, Cal-Maine cited USDA data showing industry depopulations down 70.6% and the national layer flock up 2.2% y/y over its December-to-February quarter.

Wholesale prices fell with the recovering supply, and retail prices eased more slowly. With nothing to smooth it out, Cal-Maine's profit rode the shortage up, and the recovery is now pulling it back down.

Cal-Maine reported its fiscal Q3 (ended February 28, 2026) on April 1, 2026:

The drop was almost entirely conventional eggs, where Cal-Maine's average price fell to $1.42/dozen from $4.77. The Southeast wholesale market swung from $2.69 to $0.85 inside the single quarter.

Specialty held up far better. Volume set a quarterly record and grew 6%, even though cheap conventional eggs usually pull shoppers away from the pricier specialty ones.

Underneath the price drop, demand was steady. Retail egg volumes ran about 3% higher year to date, foodservice started recovering in January, and feed cost held near $0.49/dozen.

Cal-Maine ended Q3 with $1.15B of cash and investments, almost no debt, and $2.7B of equity.

Net cash alone is about $24/share, ~31% of the market cap, and enough to keep buying competitors and paying dividends straight through the down years.

Management put about $1B to work over the trailing year, and the split shows the priorities:

The buyback is opportunistic. Cal-Maine repurchased 329,830 shares for $24.3M in Q3, and the share count has drifted from ~49M to ~47.4M over two years.

One overhang is worth knowing. Cal-Maine was long a "controlled company," meaning the founder's family held majority voting power through special shares and the board was exempt from some independence rules.

Those shares converted in April 2025, and the family has signaled it may sell part of its stake to diversify, a potential source of selling pressure.

Cal-Maine's variable dividend pays out one-third of each quarter's net income, so the 10.3% yield is really a bet on what net income does next.

When profit spikes, the dividend spikes. When profit falls, the dividend falls with it.

Over the past year, Cal-Maine paid about $8/share in dividends ($384M across roughly 47.4M shares), almost all of it from the boom quarters. That trailing payout is what produces the 10.3% headline yield.

The Q3 dividend was already down to $0.36, on $50.5M of net income. As earnings settle toward a normal year near $4 per share, one-third of that is a dividend around $1.30, a yield under 2% at today's price.

The income is real. It just shrinks as fast as profit does.

What Cal-Maine does from here is what actually decides the investment case.

A plain conventional egg has no brand and no pricing power. It sells for whatever the market sets, so a normal year is a thin-margin year. The only way to earn more than that, and to earn it more reliably, is to sell something less commoditized.

That's the plan, and it runs through three moves: (1) growing specialty eggs, (2) putting conventional eggs on steadier pricing, and (3) building out prepared foods.

Specialty Eggs

Specialty reached 50.5% of shell egg sales in Q3, up from 24.4% a year earlier. These eggs carry higher margins and steadier pricing.

Most specialty pricing is grain-based, fixed, or cost-plus, with only about 12% tied to the volatile California cage-free market. That's why specialty sales fell 12% in the quarter while conventional fell 72%.

Cage-free is also becoming mandatory in more places. States covering ~27% of the US population have cage-free laws phasing in through 2030, which grows the category regardless of what shoppers prefer.

The catch is that those same mandates pull every producer into cage-free at once. As supply grows to meet them, the premium narrows, the promotions that disappeared during the shortage start coming back (management flagged this on the Q3 call), and a cage-free egg that's required everywhere edges closer to a commodity than a premium.

Hybrid Pricing on Conventional Eggs

Cal-Maine is shifting conventional eggs onto contracts that give up some of the upside in a price spike in exchange for protection on the way down.

Q3 tested it, with the wholesale market swinging from $2.69 to $0.85. Management said the contracts held up as designed: less peak profit, steadier results.

Prepared Foods

Cal-Maine entered prepared foods by buying Echo Lake Foods in June 2025 for $258M, or 5.5x EBITDA. Echo Lake makes ready-to-eat egg products and breakfast items, on $242M of revenue at a 19% EBITDA margin.

It added more in March 2026, buying the assets of Creighton Brothers and Crystal Lake for $128.5M. That deal brought 3.2 million hens, a feed mill, and nearby liquid-egg capacity to supply the prepared foods plants.

A $36M expansion, plus added lines at Echo Lake and the Crepini joint venture, should lift prepared foods capacity more than 30% over the next 18-24 months.

For all the activity, prepared foods is still under 10% of revenue. Even a 30% capacity increase shifts a business that remains mostly commodity eggs, and the full payoff lands in FY2027-2028, not this year.

Q3 was a planned trough for the segment, with plants down for that work, and management expects margins back toward the high-teens by FY2028.

If it works, Cal-Maine's normal-year profit ends up higher and steadier than its boom-and-bust history suggests. That, not the trailing 5x P/E, is what the stock has to be judged on.

So is Cal-Maine cheap, or just cheap-looking? A 5x P/E and a 14.6% distribution yield (dividends plus buybacks) suggest a steal, but both are priced off a boom-year profit, not a normal one.

What matters is what a normal year is worth, and that's where the buy-or-pass call gets made.