A strong first-quarter fiscal 2013 performance that included year over year earnings growth of 200% aided Cal-Maine Foods Inc. ( CALM - Snapshot Report ) to attain a Zacks #1 Rank (Strong Buy) on December 26, 2012. The company is scheduled to report its second quarter fiscal 2013 earnings on December 31, 2012. The coming quarter is expected to surpass expectations on the back of rising demand of shell eggs and important strategic acquisitions of the company.

The Rank Drivers

A solid quarter, rising estimates, growing retail demand for its specialty shell eggs and an acquisition-based growth strategy are the rank drivers for this stock.

On October 1, Cal-Maine Foods reported fiscal first quarter earnings of 39 cents per share, which outpaced the Zacks Consensus Estimate of 26 cents and soared 200% from the prior-year quarter.

Cal-Maine Foods reported net sales of $272.9 million, up 12.0% from last year thanks to higher pricing and a solid sales performance from its premium-priced specialty shell eggs (highly nutritious, cage-free and organic eggs). The specialty egg sales gained from rising consumer demand and comprised 23.5% of total shell egg sales revenue for the quarter.

In early August, Cal-Maine Foods closed the acquisition of two egg production facilities from Pilgrim’s Pride Corporation, which have a capacity of approximately 1.4 million egg laying hens. The acquisition, which was announced in mid July, is expected to significantly expand the company’s business mainly in the Texas region, where the facilities are located.

Moreover, in November 2012, the company closed the acquisition of the commercial egg production and related assets of Maxim Production Co. Inc., including a feed mill and two production complexes that have a capacity for approximately 3.5 million egg laying hens located near Boling, Texas.

Earnings Estimates Rising

Over the last 90 days, the Zacks Consensus Estimate for 2013 has increased 10% to $3.06. The Zacks Consensus Estimate for fiscal 2014 has risen almost 7% to $3.49 per share over the same time frame.

Valuation

Cal-Maine Foods looks attractive at current levels. The stock currently trades at a forward price-to-earnings (P/E) of 14.6x, representing a discount of 29.5% to the peer group average of 20.7x. On a Price-to-book basis the stock is trading at a premium of 29.4% to the peer group average. However, the shares trade at a discount of 5.1% to the peer group on a price-to-sales basis.

Based in Jackson, Mississippi, Cal-Maine Foods is the largest producer and distributor of fresh shell eggs in the U.S. Its eggs are marketed across the southwestern, southeastern, mid-western and mid-Atlantic regions of the country. Its specialty shell egg brands include Egg-Land’s Best, Farmhouse and 4-Grain. The company currently has a market cap of $1.05 billion.