Calavo Sinks 16% As 1Q Sales Outlook Lags Street Estimates

Shares of Calavo Growers plunged 16% in Monday’s extended trading after the fresh food provider posted lower-than-expected revenues and earnings in the fourth quarter. Additionally, the company’s 1Q revenue outlook also fell short of analysts’ estimates.

Calavo’s (CVGW) 4Q earnings of $0.34 per share declined 24.4% year-over-year, and missed the Street’s estimates of $0.64 per share. Revenue dropped 20% to $234.4 million year-over-year and lagged the consensus estimates of $256.1 million.

The company’s CEO James E. Gibson said, “Avocado volumes increased due to rising popularity in the U.S. and abroad.” He added, “Our fourth quarter results reflect a continuation of trends from the third quarter. With strong crops out of both Mexico and California, supply in the fourth quarter was plentiful, lowering the average selling price by 22% versus the year-ago quarter, when supply was very constrained. Many foodservice outlets remained unavailable to absorb the crop size and quality dispersion, which has historically helped to maintain margins. As a result, revenue and gross margin declined year-over-year.” (See CVGW stock analysis on TipRanks)

As for 1Q, Calavo expects to generate revenue in the range of $215 million to $225 million, compared to analysts’ projections of $257.8 million.

On Dec. 11, Jefferies analyst Robert Dickerson maintained a Hold rating and a price target of $73 (1% upside potential) on the stock. The analyst said that, “While we like the synergistic cost strategy, in-house RFG [Renaissance Food Group] manufacturing, branded innovation, and clean B/S [balance sheet], we’re waiting for improved visibility around pricing recovery potential before becoming more constructive.”

Currently, the Street has a cautiously optimistic outlook on the stock with a Moderate Buy analyst consensus. The average price target stands at $79 and implies upside potential of about 9.3% to current levels. Shares have fallen by 20.2% year-to-date.

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