Recommendation: Buy

Share Price (as of 2/4/15): $36.53Sector Head: James

Carlstedt Michael Metz

Thomas Chadwick

Cal- Maine Foods, Inc.(CALM:NASDAQ)

Fundamentals • Sector: Consumer Staples • Current Price: $36.53• Market Cap: $1.72B• 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

Mtk Cap 1.72B 14.81B 1.86B 13.58B

P/E 9.95 16.12 7.41 22.96

P/B 2.66 1.6 2.06 3.74

P/S 1.13 .37 .67 1.45

Beta .61 .6 .2 .6

EPS 3.52 2.42 10.79 2.23

Thesis• Leading producer• Highly fragmented industry• Price shock from Chinese ban• Prop 2 – increased capex

– Higher barrier to entry• Acquisitions – seeking & a target• Strong management – ROE & ROA• Great dividend

DCF Valuation

Questions?