10-Q: Cal-Maine Foods Q2 Earnings Dip Amid Lower Egg Prices

Cal-Maine Foods reports a significant drop in Q2 net income and sales, primarily driven by lower conventional egg prices, despite strategic acquisitions and increased specialty egg production.

Summary

• Net income attributable to Cal-Maine Foods, Inc. for the second quarter ended November 29, 2025, was $102.8 million, or $2.13 per diluted common share, a decrease from $219.1 million, or $4.47 per diluted common share, in the prior-year period.
• Net sales for the second quarter of fiscal 2026 totaled $769.5 million, down 19.4% from $954.7 million in the same period of fiscal 2025.
• The net average selling price per dozen for shell eggs declined 26.5% to $2.014 in Q2 FY26 from $2.740 in Q2 FY25, with conventional egg prices falling 38.8% to $1.802.
• Specialty egg sales decreased marginally by 0.4%, with prices down 0.8%, but volume increased by 0.3%.
• Prepared food sales surged by $61.2 million in Q2 FY26, primarily due to the acquisition of Echo Lake Foods, LLC.
• Farm production costs per dozen increased by 2.8% due to higher facility costs, while feed costs per dozen decreased by 1.2% due to lower ingredient prices.
• The company acquired Echo Lake Foods, LLC on June 2, 2025, for $275.4 million, expanding its prepared foods offerings, and Clean Egg, LLC on October 10, 2025, for $23.7 million, adding cage-free and free-range layers.
• A $500 million share repurchase program was approved in February 2025, with $74.8 million used to repurchase 846,037 shares during the twenty-six weeks ended November 29, 2025, leaving $375.2 million remaining.
• The company declared a cash dividend of approximately $0.719 per share for Q2 FY26, totaling $34.3 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to significant declines in net income, sales, and EPS, primarily driven by lower conventional egg prices. While strategic acquisitions and growth in specialty eggs are positive, the immediate financial performance is a concern, compounded by ongoing legal challenges and temporary operational setbacks at a newly acquired entity.

Positives

• Strategic acquisitions of Echo Lake Foods, LLC and Clean Egg, LLC are expanding the company's prepared foods segment and cage-free egg capacity.
• Prepared food sales increased significantly by $61.2 million in Q2 FY26, largely driven by the Echo Lake Foods acquisition.
• Specialty egg revenue increased its share of total shell egg revenue to 33.3% in Q2 FY26, up from 23.4% in Q2 FY25, indicating successful diversification.
• The company's average number of layer hens increased by 2.6% and breeder flocks by 12.7% in Q2 FY26, demonstrating efforts to mitigate tight egg supply.
• Chicks hatched increased by 65.1% in Q2 FY26 compared to the prior-year quarter, supporting future production.
• Feed costs per dozen produced decreased by 1.2% in Q2 FY26 due to lower feed ingredient prices.
• Net cash provided by operating activities increased to $373.4 million for the twenty-six weeks ended November 29, 2025, from $240.2 million in the comparable prior-year period.
• The current ratio improved to 8.0 at November 29, 2025, from 6.4 at May 31, 2025, indicating strong liquidity.

Negatives

• Net income attributable to Cal-Maine Foods, Inc. decreased by 53.1% to $102.8 million in Q2 FY26 from $219.1 million in Q2 FY25.
• Net sales for Q2 FY26 decreased by 19.4% to $769.5 million compared to $954.7 million in Q2 FY25.
• Gross profit for Q2 FY26 fell by 41.8% to $207.4 million from $356.0 million in Q2 FY25.
• Operating income for Q2 FY26 decreased by 55.5% to $123.9 million from $278.1 million in Q2 FY25.
• Basic earnings per share declined by 52.3% to $2.14 in Q2 FY26 from $4.49 in Q2 FY25.
• The net average selling price per dozen for shell eggs decreased by 26.5% to $2.014 in Q2 FY26.
• Conventional egg prices per dozen declined significantly by 38.8% to $1.802 in Q2 FY26.
• Dozens sold for shell eggs decreased by 2.2% in Q2 FY26 compared to the prior-year period.
• Farm production costs per dozen increased by 2.8% due to higher other farm production costs, primarily facility costs.
• Echo Lake Foods is experiencing a temporary reduction in production volumes and higher costs, which began late in Q2 FY26 and are expected to continue through the remainder of fiscal 2026.
• Cash and cash equivalents decreased by $128.0 million since May 31, 2025, primarily due to the Echo Lake Foods acquisition and higher dividends paid.

Risks

• The company's shell eggs, egg products, and prepared foods are susceptible to contamination, which could lead to product recalls, liability claims, and damage to reputation.
• The business is highly competitive, particularly in fresh shell eggs and prepared foods, which could result in price reductions, reduced margins, and loss of market share.
• Outbreaks of Highly Pathogenic Avian Influenza (HPAI) continue to pose a significant risk to poultry flocks, with 45.1 million commercial layer hens and pullets depopulated in calendar year 2025, potentially impacting supply and costs.
• Volatility in market prices for eggs and feed grains (corn and soybean meal) can materially impact operating results, as these factors are largely outside the company's control.
• The company faces ongoing legal proceedings, including new antitrust lawsuits alleging price inflation, which could result in substantial monetary damages and legal costs.
• The final judgment in the Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al. case, totaling $43.6 million in trebled damages, remains subject to appeal, with the company having posted a $23.9 million bond.
• The State of Oklahoma Watershed Pollution Litigation resulted in a final judgment imposing penalties and injunctive relief, including a $10 million initial funding obligation for a special master and ongoing $5 million funding requirements for 30 years, with the company's share of costs yet to be fully determined.
• The company's ability to predict and meet demand for cage-free and other specialty eggs is crucial, as customer initiatives and product mix are constantly changing.
• Global instability, including wars and attacks on shipping, could disrupt the supply chain and impact commodity prices.

Future Outlook

The company expects to continue investing in expansion projects to add approximately 1.1 million cage-free layer hens and 250,000 pullets in fiscal 2026. Echo Lake Foods is anticipated to experience temporary reductions in production volumes and higher costs through the remainder of fiscal 2026 due to ongoing efficiency and expansion projects. Management projects a favorable stocks-to-use ratio for corn and soybean meal for the remainder of fiscal 2026, but acknowledges potential volatility due to external factors. The company believes its current cash balances, investments, projected cash flows, and credit facility will be sufficient to fund cash needs for at least the next 12 months and capital commitments thereafter, though future acquisitions may require additional financing.

Management Comments

• "We believe the recent decline in wholesale egg prices primarily reflects improved egg supply and more normalized demand patterns, following disruptions associated with HPAI in the prior year."
• "Compared to the same period last year, panic-driven purchasing activity appears to have subsided, and improved pipeline availability relative to the prior-year period appears to have reduced the need for accelerated purchasing or inventory builds by retailers and foodservice operators."
• "Although hybrid pricing may reduce our profitability when egg prices are high, compared to pure market-based pricing, it could enhance our profitability when egg prices are low, and lead to reduced volatility in our financial results."
• "We remain dedicated to robust biosecurity programs across our locations and have invested more than $83 million in biosecurity technology, equipment, supplies, procedures, and training across our locations since the last major HPAI outbreak in 2015."
• "We are focused on adjusting our cage-free production capacity with a goal of meeting the future needs of our customers in light of changing state requirements and our customers goals."
• "As always, we strive to offer a product mix that aligns with current and anticipated customer purchase decisions."
• "We believe our current cash balances, investments, projected cash flows from operations, and available borrowings under our Credit Facility will be sufficient to fund our cash needs for at least the next 12 months and to fund our capital commitments currently in place thereafter."

Industry Context

The egg industry continues to grapple with the impacts of Highly Pathogenic Avian Influenza (HPAI), which led to the depopulation of 45.1 million commercial layer hens and pullets in calendar year 2025, contributing to a smaller overall U.S. table-egg layer flock compared to previous years. This has historically caused price volatility, but the current period shows a decline in wholesale egg prices, reflecting improved supply and normalized demand after prior HPAI-related disruptions. The industry is also seeing a continued shift towards cage-free eggs, driven by state mandates and customer demand, which Cal-Maine Foods is actively addressing through investments and acquisitions. The prepared foods sector remains competitive, with companies like Cal-Maine Foods expanding their offerings to diversify revenue streams.

Comparison to Industry Standards

• The decline in wholesale egg prices, with the Urner Barry Southeast Large Index falling 38.3% in Q2 FY26, reflects a broader industry trend of normalizing prices after HPAI-driven highs, aligning with market expectations for improved supply.
• The estimated U.S. table-egg layer flock of 302.8 million as of December 1, 2025, is lower than previous years (e.g., 331.4 million in 2021), indicating ongoing HPAI impact on industry-wide supply, which Cal-Maine Foods is counteracting with its own flock expansion.
• Cal-Maine Foods' increase in specialty egg revenue to 33.3% of total shell egg revenue in Q2 FY26 demonstrates a stronger shift towards premium products compared to many conventional egg producers, aligning with evolving consumer preferences and regulatory mandates in several states (e.g., California, Massachusetts, Oregon).
• The acquisition of Echo Lake Foods positions Cal-Maine Foods to compete more directly in the prepared foods sector, a segment where larger food conglomerates like Kraft Heinz, General Mills, and Nestle USA have established presences, offering a broader range of convenience products.

Legal Proceedings

• Eight new lawsuits filed since November 6, 2025, in federal court (Southern District of Indiana, Northern District of Illinois, Western District of Wisconsin) alleging the company conspired to artificially inflate conventional shell egg prices. A motion to transfer all cases to the Southern District of Indiana for consolidated pre-trial proceedings has been filed.
• Received a Civil Investigative Demand (CID) from the Department of Justice (DOJ) in March 2025 for an antitrust investigation into anticompetitive conduct by egg producers.
• Received a subpoena from the State of New York in August 2025 for information related to its investigation of anticompetitive conduct and high egg prices in the egg industry.
• Ongoing litigation in State of Texas v. Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC, remanded to trial court, with the State seeking over $1.0 million in monetary relief. Management believes the risk of material loss is remote.
• Final judgment entered on November 6, 2024, against the company and other defendants, jointly and severally, for $43.6 million (trebled damages) in Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al. The company has filed motions for a new trial or to amend the judgment and posted a $23.9 million bond. An accrual of $19.6 million was recorded in Q2 FY24.
• Final judgment entered on December 9, 2025, in State of Oklahoma Watershed Pollution Litigation, imposing approximately $420,000 in total penalties for all defendants, with the company to pay approximately $70,000. Injunctive relief includes a $10 million initial funding obligation for a special master and ongoing $5 million funding requirements for 30 years, with defendants expecting to appeal.

Stakeholder Impact

• **Shareholders**: Experience reduced earnings per share and lower dividends compared to the prior year, but benefit from the ongoing share repurchase program and the company's strategic investments in growth areas like prepared foods and specialty eggs. Legal proceedings pose a risk to future returns.
• **Customers**: Benefit from improved egg supply and normalized demand patterns, potentially leading to more stable pricing. The company's hybrid pricing model for some conventional eggs aims to help customers with business planning. Expansion into prepared foods offers a broader product range.
• **Employees**: The company's growth strategy through acquisitions and expansion projects may create new opportunities, but temporary production reductions at Echo Lake Foods could impact some employees.
• **Suppliers**: Feed ingredient suppliers may face lower demand or prices due to the company's decreased feed costs per dozen. The company's commitment to purchasing organic ingredients in advance helps ensure supply for those specific suppliers.
• **Creditors**: The company maintains strong liquidity with an improved current ratio of 8.0 and no amounts borrowed under its $250 million credit facility, indicating a healthy financial position to meet obligations.

Next Steps

• Continue investing in expansion projects to add approximately 1.1 million cage-free layer hens and 250,000 pullets in fiscal 2026.
• Monitor and manage the temporary reduction in production volumes and higher costs at Echo Lake Foods through the remainder of fiscal 2026.
• Vigorously defend against the new antitrust lawsuits in the In re Shell Eggs Litigation and await the JPML's decision on consolidation.
• Continue post-judgment proceedings and appeals in the Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al. case.
• Appeal the final judgment in the State of Oklahoma Watershed Pollution Litigation and engage in discussions for a potential expense sharing agreement for injunctive relief funding.
• Strategically and opportunistically repurchase shares under the $500 million share repurchase program, with $375.2 million remaining authorization.
• Pay a cash dividend of approximately $0.719 per share for Q2 FY26 on February 12, 2026.

Key Dates

Recommendation

While Cal-Maine Foods' Q2 FY26 results show a significant decline in profitability and sales due to lower conventional egg prices, the company is actively pursuing strategic initiatives that could drive long-term value. The acquisitions of Echo Lake Foods and Clean Egg, along with increased focus and investment in specialty eggs and prepared foods, are positive steps towards diversification and growth. The strong balance sheet, evidenced by a high current ratio and substantial cash flow from operations, provides a buffer against market volatility and supports the share repurchase program and dividend payments. However, the ongoing legal challenges, particularly the antitrust lawsuits and the substantial judgment in the Kraft Foods case, introduce considerable uncertainty and potential financial liabilities. The temporary production issues at Echo Lake Foods also present a near-term headwind. Given the mixed signals—strategic growth initiatives offset by immediate financial underperformance and significant legal risks—a 'hold' recommendation is appropriate. Investors should monitor the resolution of legal proceedings and the successful integration and performance of recent acquisitions before making further commitments.

Keywords

Egg production, Shell eggs, Prepared foods, Cage-free eggs, Avian Influenza, HPAI, Antitrust litigation, SEC filing, Quarterly report, Financial results, Acquisitions, CALM