Chicago, IL – February 18, 2025 – Zacks Equity Research shares Cal-Maine Foods, Inc. CALM as the Bull of the Day and e.l.f. Beauty ELF as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corporation NVDA and BigBear.ai Holdings, Inc. BBAI.
Here is a synopsis of all five stocks:
Cal-Maine Foods, Inc. is selling a record number of eggs, thanks to the egg shortage. This Zacks Rank #1 (Strong Buy) has soaring earnings. But is it too late to buy the stock?
Cal-Maine Foods is the largest producer and distributor of fresh shell eggs in the United States. It produces, grades, packages, and distributes fresh shell eggs, including conventional, cage-free, organic, brown, free-range, pasture-raised, and nutritionally enhanced eggs.
On Jan 7, 2025, Cal-Maine Foods reported its fiscal second quarter 2025 results. Net sales jumped to $954.7 million from $523.2 million the prior year due to an increase in net average selling price of shell eggs as well as an increase in total dozens sold.
The average selling price per dozen rose to $2.74 from $1.73 the prior year due to the egg shortage which is the result of recent outbreaks of highly pathogenic avian influenza ("HPAI"), otherwise known as the bird flu.
Additionally, feed cost fell 12.8% to $0.483 from $0.554 in fiscal 2024.
It was nearly ideal conditions for Cal-Maine Foods as it also saw strong egg demand, especially ahead of the Thanksgiving holiday.
It sold 329.8 million dozens shell eggs, up from 288.2 million in the year ago period. Sales of conventional eggs were 209.6 million dozens, up 8.9% from 192.5 million last year.
Specialty egg sales boomed, jumping 25% to 120.2 million dozens from 95.7 million dozens the prior year.
As bird flu kills more chickens, and eggs remain in low supply but big demand, Cal-Maine continued to make strategic investments to expand its operations.
As of Jan 7, 2025, it had about $60 million in new capital projects that would expand its cage-free capacity. The projects include the addition of five new cage-free layer houses and two pullet houses across the company's locations in Florida, Georgia, Utah, and Texas.
When those projects are completed, Cal-Maine Foods expects capacity for about 1.1 million cage-free layer hens and 250,000 pullets by late summer 2025.
It's also spending $15 million to expand its egg products processing facility in Blackshear, Georgia, to add extended shelf-life liquid egg products.
Cal-Maine Foods also expected that is processing plant and hatchery in Dexter, Missouri, will be online in the fiscal third quarter of 2025.
Zacks only has one earnings estimate on Cal-Maine Foods and it is for the full year. But that analyst was bullish thirty days ago, as the fiscal 2025 Zacks Consensus jumped to $15.59 from $8.54 during that time.
That is earnings growth of 174% as it made $5.69 in fiscal 2024.
Egg prices continue to rise as shortages continue. In calendar 2024, 38.4 million commercial layer hens and 1.8 million pullets were depopulated due to the bird flu.
2022 was the last time there was a big surge in egg prices.
Call-Maine Foods has a variable dividend policy which states that for each quarter in which the company reports net income, it pays a cash dividend to shareholders in an amount equal to one-third of such quarterly income.
The fiscal second quarter dividend was $1.49 per share. It was payable on Feb 13, 2025 to holders of record as of Jan 29, 2025.
Cal-Maine Foods is in a cyclical industry. Investors have piled into the stock in the last year as egg prices have risen, and so have earnings and dividends.
But it looks like some investors are taking gains off the table.
The stock is cheap, with earnings at these levels. It trades at 7x. But when earnings fall again, the stock will not be as cheap.
For investors looking for a way to invest in record egg prices, Cal-Maine Foods should be on your short list.
e.l.f. Beauty recently warned about slowing sales in January 2025. As a result, this Zacks Rank #5 (Strong Sell) lowered its fiscal full year 2025 guidance and shares sank.
e.l.f. Beauty operates a beauty company with a mission to make the best of beauty accessible to every eye, lip, and face. Its brands include e.l.f. Cosmetics, e.l.f. SKIN, Keys Soulcare, Well People and Naturium. e.l.f. Beauty offers clean and vegan products.
On Feb 6, 2025, e.l.f. Beauty reported its fiscal third quarter 2025 earnings results. It missed on earnings for the first time since early 2021.
Earnings were $0.74 compared to the Zacks Consensus of $0.76.
Sales, however, rose 31% to $355.3 million, driven by strength in both the retailer and e-commerce channels, in both the U.S. and internationally.
Gross margin increased again, rising 40 basis points to 71%, due to favorable foreign exchange impacts on goods purchased from China, cost savings and inventory adjustments, partially offset by mix and higher transportation costs.
e.l.f. Beauty's CEO, Tarang Amin, said in the press release that e.l.f. gained 220 basis points of market share in the US in the quarter.
However, in a shock announcement, e.l.f. Beauty saw softer than expected trends in January, so it lowered its fourth quarter and full year guidance.
It now expects 27-28% year-over-year net sales increase for the quarter, down from its prior guidance of 28-30%.
Full year earnings guidance was also lowered to a range of $3.27 to $3.32 from the prior guidance of $3.47 to $3.53.
As a result, the analysts have cut their fiscal 2025 estimates, but also their fiscal 2026 estimates, in the last 30 days.
13 estimates were cut for fiscal 2025, which pushed the Zacks Consensus down to $3.33 from $3.60 during the last month. That is earnings growth of just 4.7% over fiscal 2024 as the company made $3.18 last year.
13 estimates were also cut for fiscal 2026 after the earnings report. The 2026 Zacks Consensus Estimate has fallen to $3.63 from $4.35 in that time. However, that's still earnings growth of 9.1%.
Here's what it looks like on the price and consensus chart. The prior years saw strong earnings growth but now, the consensus is being cut.
e.l.f. Beauty shares got slammed on the lowered guidance, but they had already been weak since July of 2024. They are down 54% in the last year but remain above the S&P 500's performance of the last 5 years.
e.l.f. Beauty was one of the big growth stocks coming out of the pandemic. Investors bid the shares up to sky-high valuations with high price-to-earnings (P/E) multiples as they were willing to pay more for the growth.
With the shares coming down, it now trades with a forward P/E of 21.9. That is still not a value stock, even though it's looking more attractive. Value stocks usually trade under 15x.
Is the consumer permanently slowing down purchases with respect to beauty?
Only time will tell. But investors might want to wait on the sidelines until e.l.f. Beauty's sales outlook improves.
With the arrival of artificial intelligence (AI), NVIDIA Corporation experienced rapid business growth. Its shares have soared 85.8% in the past year. However, BigBear.ai Holdings, Inc. recently became a Wall Street darling, with its shares surging a whopping 332.5% over the past year.
BigBear.ai stock has more than doubled this year, now trading over $9 from $4 at the beginning of the year. Does this mean the company that offers AI-powered decision-intelligence solutions is a promising investment in the AI industry? Let's find out –
BigBear.ai recently secured a contract with the Department of Defense for its Virtual Anticipation Network ("VANE"), leading to a rally in its shares. VANE will utilize machine learning and AI to predict and proactively address adversarial actions in complex settings, according to BigBear.ai.
The government contract opens up more business opportunities for BigBear.ai in the long run. With the government poised to spend more on defense, BigBear.ai has immense growth potential. BigBear.ai was also awarded a Navy contract last month, opening doors for growth in other federal agencies.
The change in CEO, in the meantime, has been a boon for BigBear.ai. Mandy Long has been replaced by Kevin McAleenan, who has increased access to the Trump administration and extensive experience with government agencies, helping BigBear.ai secure more government contracts.
An outcome from a recent summit in Paris, meanwhile, provided BigBear.ai with a bullish momentum. Proceedings from the event showed that European leaders are inclined toward relaxing AI regulatory standards, benefiting BigBear.ai's EU presence.
BigBear.ai winning new contracts vis-à-vis share price gains may tempt retail investors to buy the stock. However, BigBear.ai's financials don't justify such rapid growth in its stock price.
BigBear.ai's revenues for the first nine months of 2024 were unchanged from the same period a year ago, while the company had to bear operating losses in the past three quarters and bore a hefty goodwill impairment charge. The business is far from breaking even, making the BBAI stock susceptible to corrections soon.
BigBear.ai, anyhow, has a bad reputation for going through a boom-and-bust cycle. For instance, in 2023, a broader AI boom led by the success of ChatGPT helped the BBAI stock rally. However, the company couldn't sustain its revenue growth, and the BBAI stock fell in 2024. Rapid growth also leads to profit bookings, which adds to price declines.
Hence, investors should adopt a wait-and-watch approach for better clarity about its prospects since BigBear.ai's growth has, time and again, been inconsistent, and the stock is subjected to immense volatility. The BigBear.ai stock is currently more volatile than the markets it trades in. It has a beta of 3.17.
Therefore, it's too early to predict BigBear.ai as the next NVIDIA, given NVIDIA's solid financials, chip demand, and market dominance, which contribute to long-term growth for the semiconductor giant (read more: NVIDIA or Palantir: Which is the Better AI Stock to Buy Now?).
NVIDIA has a Zacks Rank #2 (Buy), whereas BigBear.ai has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
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