By Paul R. La Monica

Making an omelet costs a lot more these days, assuming you can find the eggs for them in the first place. Egg prices have surged recently due to a shortage because of avian influenza.

The 15% jump in egg prices in January alone -- and 53% surge over the past 12 months -- is bad news for those who love their runny yolks and egg whites. But it's been a boost for Cal-Maine Foods, the largest producer of eggs in the United States. It distributes popular brands such as Eggland's Best and Land O'Lakes.

The company reported strong earnings last month, citing rising prices from both the bird flu and robust demand during the holiday season late last year. So should investors consider shelling out money to buy the stock?

Shares of Cal-Maine Foods have flown 90% in the past 12 months and have gained more than 5% so far this year. The stock looks cheep -- sorry, cheap -- trading at just 6 times earnings estimates for this fiscal year, according to FactSet. But that valuation isn't all it's cracked up to be.

Only two Wall Street analysts cover Cal-Maine, so there's a bigger shortage of opinions on the stock then there are of egg cartons at your local grocery store. What's more, the main reason that earnings estimates for this year are so high (and hence such a low price-to-earnings ratio) is because of the shrinking egg supply.

The Cal-Maine analysts expect that both the average selling price for a dozen eggs and revenue for the company will fall 30% next year. That's why 2026 earnings should normalize, plunging 70% to below levels from fiscal 2024. So when looking farther out, Cal-Maine appears much pricier: The stock trades at 21 times 2026 earnings forecasts, only slightly below the multiple for the S&P 500.

The two analysts who cover Cal-Maine are also not particularly bullish on the stock either. While Consumer Edge Research's Alex Jarombek does have a Buy recommendation on the stock, his price target of $108 is less than 1% above the current share price. Pooran Sharma of Stephens rates the stock a Hold with a price target of $97. That's 10% below where it is trading now.

Shares of another smaller egg producer, Vital Farms, have also rallied, more than doubling in the past year. The stock is pricey, trading at 29 times earnings estimates. But the company is more diversified than Cal-Maine, selling butter in addition to eggs. Wall Street also expect earnings and sales for Vital Farms to increase both this year and in 2026. Seven of the eight analysts that follow the stock rate it a Buy, and their consensus price target of nearly $48 is 35% above its current price.

So while neither Vital Farms nor Cal-Maine look like egg-ceptional bargains at these prices, it looks like Vital Farms stock at least has the chance of coming home to roost for investors.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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February 13, 2025 11:48 ET (16:48 GMT)

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