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CALM- Baked Eggs



July 15, 2017 – Comments (0) | RELATED TICKERS: CALM

CALM is by all appearances a fine, well run company.  Management is solid and stable.
Egg dozen sales continue to increase, albeit slowly.  Revenues are constrained by egg
prices.  They is what they is, and won't change appreciably, all other things being equal.

So what can we expect from CALM in Q4?

This table (from CALM 10-Q and 10-K)looks back over the past 4 quarters, including Q4 of 2016.

                                        Q3                   Q2                    Q1                   Q4
Avg price/Dz (NE)              .81                  .54                   .58                   .69
Sales                         306,540         $253,544          $239,845          $303,020
EPS (Loss)                        .09                (.48)                (.64)                 (.01)

Dz Sold/Avg$
Regular                   $197k/.85        $133k/.64      $113.5k/.64      $163.9k/.86
Specialty               $62.3k/1.96     $113k/2.00     $109.3k/1.97      $118.4/2.01
% Reg/Spec              56%/41%       50%/46%         48%/47%         56%/40%

Average Price/Dozen (NE) is what we are buying eggs for in New England, which I'm using as
a relative measure.  While CALM seems to get a little bit more than we pay for eggs
(may or may not be true), prices do seem to follow, so we can reasonably use our numbers
as a proxy.

The price we paid per dozen in Q4 of 2017 (through May 31, 2017) averaged 65¢/dozen. 
While it is clear that CALM can make money at 81¢/dozen, it is equally clear that they
won't make money at 65¢/dozen.

Somebody who is more talented in math could probably chart the relationship between
average egg prices and EPS; I'd love to see that chart if you are in fact talented in that way.

But more relevant to the share price, in my opinion, is the dividend, or lack thereof.  There
will be no dividend this quarter, making it five straight quarters without.

Furthermore, the dividend policy states that there will be no dividend paid until the
accumulated shortfall is made up.  The current accumulation is a loss of $1.04. 

While it is unlikely that eggs will remain at these low prices forever, they are currently showing
no sign of strengthening. 

However, let's assume that through product mix, cheaper inputs, etc, 65¢/dozen becomes
break-even and prices return to 80¢/dozen from this point forward.  This suggests about
10¢ EPS/quarter, which means CALM will not pay adividend for at least two more years. 
Trailing Twelve Month Earnings would not return to $0 for 3 quarters.

So let's assume I'm coming to the market for the first time.  A cursory look at CALM:
EPS: 0
P/E: negative
Dividend: none

What would compel me to buy it?  Why would I be holding it now?  Based on any traditional
metric, CALM has no value (except as a cyclical play or bird-flu risk...good luck with those).

p.s.: analysts are predicting GAAP earnings of $0.31 per share in Q4 2017, $0.24 in Q1 2018, $0.70 in Q2 2018 and $0.80 in Q2 2018. Caveat emptor.

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