Embed Size (px)
Citation preview
Pitch walk-through: (CALM)Mike Metz
Recommendation: Buy
Share Price (as of 3/26/15): $38.81Michael Metz
Thomas Chadwick
Cal- Maine Foods, Inc.(CALM:NASDAQ)
Thesis• Leading producer• Highly fragmented industry• Price shock from Chinese ban• Prop 2 • Acquisitions • Alignment between
shareholders/management • Strong dividend
Fundamentals • Sector: Consumer Staples • Current Price: $38.81• Market Cap: $1.87B• Beta: .61• P/E: 10.16 • Dividend Yield: 1/3 Net Income Paid
Quarterly• Last Years Annual Yield:2.87% • Revenue: $1.45B• EBITDA:$183M
Egg Industry
• Products–Shell Eggs–Specialty Shell Eggs –Egg Products- Liquid, Frozen–Food Service–Export
Cal- Maine Foods, Inc.• Largest producer/ marketer of shell eggs in USA• 3 Business Segments
– Specialty Eggs– Regular Shell Eggs – Liquid, Frozen, or Dried
• Produces domestically
72.63%
24.37%
3.00%
Revenue from Segments
Regular Shell EggsSpecialty EggsLiquid, Frozen, or Dried
Highest Total Layers- USA
CALM’s Top Locations/ Brands
• Southwestern • Southeastern • Mid- Western• Mid- Atlantic
• Egg-Land’s Best®, Land O’ Lakes®, Farmhouse®, and 4-Grain®
Top 10 Customers
Vertically Integrated
CALM Egg Growth
Top-Line Growth
Customer’s Health Choices
Risk Factors:
1.Egg Price Volatility 2.Feed Price Volatility3.Shift to other products 4.Seasonality 5.Government Regulation 6.Consumer Demand 7.Barriers of Entry
Egg Price Volatility
Feed Price Volatility
Risk of Consumer’s Shifting to Other Products
Seasonality
Government Regulation/ Barriers to Entry
• Prop 2 California- 2014 • Animal Rights Activists
– Animal Concentration
Consumer Demand
CAPEX Strategy • Growth and Acquisition of Fragmented
Market• Improved Facilities
Acquisitions
• Completed 18 acquisitions since 1989• Acquired remaining 50% of Delta Egg
Farms for $17M- 2014
Latest Earnings Report• 12/23/14 reported Q2 of 2015
• Net Sales $378.6 million (6.9% yoy)• 36.6 million Net Income• $0.76 per share
• Fiscal 2014: 1.014 Billion Dozen Shell Eggs Sold
Financial Highlights
Institutional/ Insider Holdings • 12/23/14 reported Q2 of 2015
• Net Sales $378.6 million (6.9% yoy)• 36.6 million Net Income• $0.76 per share
• Fiscal 2014: 1.014 Eggs Sold
*13G/A Filing on 1-30-2015 BlackRock Institutional purchased a 6.3% stake
Recent Decline Due to Misunderstanding
• China temporarily banned imports of US chicken, turkey, and eggs– Effective January 8, 2015– Strain of (HPAI) in Pacific Northwest
• Occurs only in wild birds/ small domestic flocks• Hundreds of miles away from US commercial prod.
• Exports to China account for 0.7% of total US shell egg production
Stock Performance
Comparable Competitors*
*main peers are Rose Acre Farms, Moark LLC, Rembrandt Enterprises, Daybreak Foods
CALM TSN SAFM HRL IBA
Mtk Cap $1.72B $14.51B $1.83B $14.91B $2.61B
P/E 9.95 16.43 6.36 24.54 10.14
P/B 2.66 1.77 1.96 4.03 1.69
P/S 1.13 .41 .66 1.59 .98
Beta .61 .11 .62 1.00 .72
EPS 3.52 2.39 12.41 2.30 5.15
Review• Leading producer• Highly fragmented industry• Price shock from Chinese ban• Prop 2 • Acquisitions • Alignment between
shareholders/management • Strong dividend
DCF Valuation
Questions?
Industry & Company ResearchJamie Carlstedt
How do I find a company?
Resources
• Bloomberg terminal• ETF Database
• MSU library resources• Morningstar.com• Finviz.com• Wall Street Journal• Equity Research Reports• Google search for things!
BEST!
Company website
Company filings
Presentations
Earnings calls
Other juicy info…
“Investor Relations”
SEC FIlings
10-K = Annual Filing
10-Q = Quarterly Filing
8-K = Current Report
DEFA14A = Proxy Filing
Sections of 10-K1) Business
2) Risk factors
3) Unresolved staff comments
4) Properties
5) Legal proceedings
6) Market for registrant’s common equity, related stockholder matters & issuer purchases of equity securities
7) Selected financial data
8) Management’s discussion & analysis of financial condition & results of operations
9) Quantitative & qualitative disclosures about market risk
Sections of 10-K10) Financial statements & supplementary data
11) Changes in & disagreements with accountants on accounting and financial disclosure
12) Directors, executive officers & corporate governance
13) Certain relationships & related transactions, & director independence
14) Principal accountant fees & services
15) Exhibits, financial statement schedules
Value Investing
Porter’s 5 forces
- “Whether we’re talking about socks or stocks, I like
buying quality merchandise when it is marked down.”
Recommended Reading
The Intelligent Investor by Benjamin Graham
Hopefully not.
Professional LinkedIn photos - $20
Next Wed., Oct. 21 after our meeting
