Cal-Maine Foods, Inc. Q2 FY2026 earnings call

• The company has built momentum with a diversified business model, showing resilience despite lower egg prices. Specialty egg business maintained strong prices and volumes, and prepared foods expansions are positioning for double-digit volume growth.
• There's a shift in sales mix, with specialty eggs and prepared foods combined accounting for 46.4% of net sales in 2026 compared to 31.2% in 2025.
• Key strategic highlights include expansions in prepared foods (e.g., $15M network optimization and capacity expansion project for Echo Lake Foods), acquisition of production assets from Clean Egg LLC to boost specialty cage-free and free-range egg capacity, and emphasis on long-term strategy for sustainable growth across cycles.
• Acknowledgment of the team's role in driving operational and financial performance.

In the second quarter of Fiscal 2026, net sales were $769.5 million. Shell egg sales were $649.6 million, down 28.1%, representing 84.4% of total net sales. Conventional egg sales were $363.9 million, down 41%, while specialty egg sales were $285.7 million, down 0.4% but accounting for 44% of total shell egg sales. Prepared foods sales were $71.7 million, up 586.4% from Fiscal 2025 but down 14.5% from 2026 Q1. For the first half of Fiscal 2026, net sales were $1.7 billion. Shell egg sales were $1.4 billion, down 12.5%, with conventional eggs at $869.8 million (down 21%) and specialty eggs at $569.2 million (up 4.7%). Prepared foods sales were $155.6 million, up 702.9%.

• Prepared foods are expected to deliver sustained double-digit volume growth, with a goal of 30% growth over the next 18-24 months.
• Believes the hybrid pricing model will improve mid-cycle performance, and specialty eggs growth will continue.
• Emphasizes long-term investment in egg consumption growth and reliability of supply as key to sustainable growth.

• Ongoing bird flu issues: Global outbreaks of high-path AI in poultry continue, with recovery uneven and unpredictable. The presence of the virus is still widespread, with many countries reporting outbreaks and high incidence rates similar to prior years like 2022.
• Unpredictability in demand factors: Demand is influenced by multiple dynamic variables including bird gains/losses, shopping shifts, media panic, weather, market movements, promotions, and holiday timing.

Q: Given current spot prices for eggs, how does Cal-Maine's portfolio changes (prepared foods, specialty eggs) affect earnings power in depressed ag markets?

A: Sherman Miller states specialty eggs have double-digit growth and prepared foods are performing, with hybrid pricing beneficial in lower markets. Max Bowman adds the company is different from previous market conditions with stronger balance sheet, diversification, and growth in prepared foods and specialty.

Q: Can Cal-Maine weather down markets like this without generating losses given changes?

A: Sherman Miller says the company is in a better position with stronger balance sheet, growth in specialty and prepared foods, and hybrid pricing. Max Bowman notes prepared foods are countercyclical and benefit from lower egg markets.

Q: About prepared foods segment margins, what's the outlook?

A: Sherman Miller says prepared foods aim for 19% EBITDA margin, with temporary lower volumes and higher costs during expansion but long-term benefits.

Q: How does capacity growth for specialty eggs look, and M&A vs organic?

A: Sherman Miller says specialty eggs could make up over 50% of shell egg net sales long-term, with Clean Egg acquisition being timely. Max Bowman mentions the acquisition of 677,000 brown cage-free and free-range layers and pullets.

Q: Thoughts on bird flu cases decreasing?

A: Sherman Miller states the presence of the virus is still widespread globally, with many countries reporting outbreaks and high incidence rates similar to prior years, despite lower bird numbers in some areas.