Calavo (NASDAQ:CVGW) Surprises With Q1 Sales, Stock Jumps 11.9%

Kayode Omotosho /
2024/06/10 4:17 pm EDT

Fresh produce company Calavo Growers (NASDAQGS:CVGW) reported results ahead of analysts' expectations in Q1 CY2024, with revenue down 24.6% year on year to $184.4 million. It made a non-GAAP profit of $0.50 per share, improving from its loss of $0.01 per share in the same quarter last year.

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Calavo (CVGW) Q1 CY2024 Highlights:

  • Revenue: $184.4 million vs analyst estimates of $165.8 million (11.2% beat)
  • EPS (non-GAAP): $0.50 vs analyst estimates of $0.38 (32.5% beat)
  • Gross Margin (GAAP): 11%, up from 6.1% in the same quarter last year
  • Market Capitalization: $452.3 million

Management Commentary “We are pleased with our second quarter results, which reflect strong operational performance across our portfolio, demonstrating Calavo’s earnings capacity,” said Lee Cole, President and Chief Executive Officer of Calavo Growers,

A trailblazer in the avocado industry, Calavo Growers (NASDAQGS:CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.

Perishable Food

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Sales Growth

Calavo is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's revenue has declined over the last three years, dropping 6.7% annually. This is among the worst in the consumer staples industry, where demand is typically stable.

Calavo Total Revenue

This quarter, Calavo's revenue fell 24.6% year on year to $184.4 million but beat Wall Street's estimates by 11.2%. Looking ahead, Wall Street expects revenue to decline 21.4% over the next 12 months.

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Operating Margin

Operating margin is a key profitability metric for companies because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.

In Q1, Calavo generated an operating profit margin of 3.9%, up 4.5 percentage points year on year. This increase was encouraging, and we can infer Calavo had stronger pricing power and lower raw materials/transportation costs because its gross margin expanded more than its operating margin.

Calavo Operating Margin (GAAP)

Zooming out, Calavo was profitable over the last eight quarters but held back by its large expense base. It's demonstrated subpar profitability for a consumer staples business, producing an average operating margin of 1.3%. However, Calavo's margin has improved by 1.2 percentage points on average over the last year, showing the company is heading in the right direction.

Key Takeaways from Calavo's Q1 Results

We were impressed by how significantly Calavo blew past analysts' revenue and EPS expectations this quarter. The company's strong outperformance was driven by improved prices in its core avocado business and favorable input costs in its guacamole business.

Looking ahead, Calavo didn't provide guidance but notes it's aiming to close the sale of its Fresh Cut division in the fiscal third quarter (calendar year Q2).

Overall, this quarter's results still seemed fairly positive and shareholders should feel optimistic. The stock is up 11.9% after reporting and currently trades at $28 per share.

So should you invest in Calavo right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.