NEW YORK (TheStreet) -- With shares up some 18% just in the past month, it would seem investors are scrambling to own Cal-Maine Foods (CALM) - Get Report , the largest egg producer and marketer in the U.S. If you've followed our advice and bought these shares since last October, your position would be up around 50%. But it's not too late.
Headquartered in Jackson, Miss., Cal-Maine reports first-quarter fiscal 2016 earnings results Monday before the opening bell. Is 43% stock gain so far in 2015 is crushing the 4% decline in the S&P 500 (SPX) index. But with a price-to-earnings ratio of just 16, compared to a P/E of 21 for the S&P 500, Cal-Maine stock has tons of more room to run. Not only does the stock has a consensus buy rating, its average analyst 12-month price target is $66 though it currently trades around $57.
Why the continued bullishness? Higher-than-expected demand for its specialty eggs, sold under brands like Egglands Best and Land O Lakes, Cal-Maine operates a highly profitable business that is seemingly getting better each quarter. These brands, which account from about 30% of its sales, are not only growing revenue at impressive rates (up 6.2% in the fourth quarter), they are driving higher profits at the same time the company's feed costs are declining.
That's a healthy combination.
In the fourth quarter, Cal-Maine's gross profit rate advance 257 basis points to 27.14%, and its operating margins -- now at 16.51% -- climbed 372 basis points. Aside from the lower feed cost, Cal-Maine had an average price increase of 2.65% for its eggs. It would seem consumers don't mind paying the higher price, as evinced by the 21% year-over-year jump in egg sales volume.
What does all of this mean? Cal-Maine is developed incredible pricing power over its competitors. It would appear the market has taken notice, given the performance of the stock. With the average analysts earnings-per-share estimate for the just-ended quarter spiking 23% in the past seven days from $2.54 to $3.14, it would be a mistake to part with Cal-Maine stock ahead of Monday's results.
For the quarter that ended August, EPS of $3.14 implies a year-over-year increase of 450% on revenue of $600 million. For the year, ending May 2016, earnings per share of $11.83 are projected to crush the comparable quarter of $3.33 a share, while revenue of $2.39 billion would mark a 51% jump year over year.
All told, there is nothing conservative about either the EPS or revenue projections, suggesting that Cal-Maine stock -- at just seven times forward 2017 EPS estimate of $7.07 a share -- can feed profit-hungry investors for several more quarters. Is 31.75-cent quarterly dividend and 2.30% annual yield -- 30 basis points higher than S&P 500 index -- sweeten the deal. What's not to like?
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.