In a report released today, Adam Samuelson from Goldman Sachs maintained a Sell rating on Cal-Maine Foods (CALM – Research Report), with a price target of $47.00.
Adam Samuelson has given his Sell rating due to a combination of factors that suggest the recent performance of Cal-Maine Foods is not indicative of long-term sustainability. He acknowledges that while the company has benefited from higher egg prices and lower feed costs in the near term, these advantages are primarily the result of temporary market conditions. Specifically, the boost in profits has been driven by the Highly Pathogenic Avian Influenza (HPAI) and an increase in retail demand, both of which are seen as short-term tailwinds rather than lasting trends.
Samuelson also points out that the stock’s valuation has become unfavorable, rising approximately 32% since its lows in October, which he attributes to the aforementioned exogenous factors. This surge in share price has led to an overvaluation relative to the company’s excess cash and expected return on invested capital (ROIC) and return on equity (ROE). Despite raising the price target slightly due to the anticipated short-term cash flow increase, Samuelson maintains a Sell rating, suggesting that the current market price excessively exceeds the company’s normalized financial metrics and potential for sustained earnings growth.
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Based on the recent corporate insider activity of 23 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CALM in relation to earlier this year.
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Cal-Maine Foods (CALM) Company Description:
Cal-Maine Foods, Inc. engages in the production, grading, packing, marketing, and distribution of fresh shell eggs. The firm operates farms, processing plants, hatcheries, feed mills, warehouses, offices and other properties. It markets shell eggs to national and regional grocery store chains, club stores, foodservice distributors, and egg product manufacturers. The company was founded by Fred R. Adams Jr. in 1957 and is headquartered in Jackson, MS.
