What Happened?

Shares of fresh produce company Calavo Growers (NASDAQ:CVGW) fell 9.4% in the morning session after the company reported underwhelming fourth quarter results. EBITDA missed significantly and its gross margin fell short of Wall Street's estimates. The company blamed both higher fruit costs as well as higher compensation expenses. On the other hand, revenue came in ahead of expectations, though sales declined in absolute terms relative to the previous year. Overall, this quarter could have been better.

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What The Market Is Telling Us

Calavo’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 4 months ago when the stock gained 12.4% on the news that the company reported strong second-quarter earnings results. Revenue and adjusted EBITDA beat expectations, even if the magnitude of the beat was small. Keeping up with the positive theme, management's commentary was constructive: "Our third quarter results reflect continued momentum in our flagship avocado business...Despite temporary industry supply disruptions from Mexico during the quarter, we generated strong financial results due to our operational flexibility." Lastly, peer Mission Produce (AVO) also reported strong results on the same day, showing that the industry seems healthy.

Calavo is down 9.8% since the beginning of the year, and at $23.01 per share, it is trading 22.4% below its 52-week high of $29.64 from September 2024. Investors who bought $1,000 worth of Calavo’s shares 5 years ago would now be looking at an investment worth $287.41.

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