What led to Cal-Maine Foods Inc (NASDAQ: CALM) stock crash

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Cal-Maine Foods Inc (NASDAQ: CALM) stock fell over 9.5% in the pre-market session of January 6th, 2019 (Source: Google finance) after the company reported the second-quarter 2020 net loss of $10.06 million, compared to a profit of $21.81 million in the same period of last year. The company has posted lower than expected results for the second quarter of FY 20. The company’s sales volumes were relatively flat in the second quarter compared to last year, however sales declined due to lower average selling prices compared with the same period of fiscal 2019. The Southeast large market average price for conventional eggs declined 12.7 percent for the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019. Further, the average sales price fell 11.5 percent, on the back of an unfavorable balance of egg supply and demand. Hen numbers, as reported by the USDA Chickens and Eggs report as of December 23, 2019, are 340.5 million, which is an increase by 4.6 million hens than a year ago. The increase in the number of hens led to the oversupply of eggs.

Moreover, during the second quarter of FY20, the company had lost a portion of the sales of non-specialty eggs to a major customer in the Southeast region, which represents 4.6 percent of total shell egg dozens and 6.1 percent of non-specialty egg dozens for fiscal 2019. The company anticipates the new capacity additions and the previous plans to decommission some older, less efficient facilities will underpin optimize the operations, improve the sales mix, and better align the production and sales within the region. Furthermore, the average pricing for specialty eggs fell by 4.1 percent to $1.88 per dozen in the second quarter compared to the prior-year second quarter. Specialty dozens sold were also declined 5.7 percent, as sales of specialty dozens were negatively affected by low conventional egg prices.

Additionally, the company has invested more than $314 million to expand the cage-free production and continue to make progress with the expansion plans in Florida, Texas and Utah, which is expected to provide significant additional processing, pullet and cage-free capacity upon completion.

CALM in the second quarter of FY 20 has reported the adjusted loss per share of 21 cents, missing the analysts’ estimates for the adjusted earnings per share of 3 cents. The company had reported 12.5 percent decline in the adjusted revenue to $311.52 million in the second quarter of FY 20, missing the analysts’ estimates for revenue of $327.04 million.

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