Key Stats for Calavo Growers Stock
- YTD Price Change for Calavo Growers stock: -17%
- $CVGW Share Price as of Dec. 30: $21.17
- 52-Week High: $28.72
- $CVGW Stock Price Target: $32.50
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What Happened?
Calavo (CVGW) stock has struggled in 2025, down 17% as the avocado distributor faces headwinds from both regulatory issues and challenging market conditions.
The company’s third-quarter results showed net sales of $178.8 million, essentially flat year over year, but profitability took a hit from an unexpected FDA detention hold.
The FDA temporarily detained certain avocado imports from Calavo’s Mexican facility after detecting trace amounts of Imazalil, a postharvest fungicide not approved for use on avocados.
This first-ever detention in the facility’s 27-year operating history cost the company approximately $4.2 million in the third quarter. The expenses included third-party inspection costs, extra logistics expenses, and inventory write-downs on fruit that had to be diverted or sold at reduced prices.
Beyond the FDA issue, Calavo’s Fresh segment saw carton sales drop 8% year-over-year. Avocado volumes declined 5% while tomato volumes fell 27%. The Fresh segment’s gross profit declined 32% to $12.4 million, reflecting lower volumes and $4.2 million in FDA-related costs.
However, there’s a bright spot in the company’s Prepared segment, which makes guacamole and other avocado products.
Sales in this division jumped 40% to $22.9 million, driven by a 35% increase in volume. More impressively, gross profit surged 201% to $5.8 million, reflecting improved operational efficiency.
On September 2, the FDA matter was fully resolved, and management emphasized this was a one-time event. The company has filed an insurance claim to recover the costs incurred during the detention.
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What the Market Is Telling Us About CVGW Stock
The 17% decline in Calavo stock reflects investor concerns about the company’s shrinking revenue base and thin profit margins.
Over the past three years, sales have fallen at a 17.2% annual rate, suggesting consumer trends are working against the business. With a revenue base of just $694 million, Calavo lacks the scale advantages of larger competitors.
The company’s gross margin of 10.1% is concerning as it leaves little room for error and limits how much Calavo can invest in marketing or production facilities. When unexpected costs like the FDA detention hit, they can significantly impact profitability.
Management expects the Prepared segment to generate approximately $115 million in sales for fiscal 2026, representing strong growth from the current $53.5 million run rate over nine months. On a monthly basis, July sales in this division annualized to over $100 million.
Calavo stock also received a boost from two legal developments. In August, a federal court in Mexico formally recognized Calavo de Mexico as a maquila operation, which management believes strengthens its position to recover value-added tax receivables.
Additionally, the U.S. Department of Justice closed its Foreign Corrupt Practices Act inquiry related to operations in Mexico.
The company’s balance sheet remains healthy with $63.8 million in cash and $114.3 million in total available liquidity. Calavo has no borrowings under its revolving credit facility and only $5.1 million in total debt.
For the nine-month period, adjusted EBITDA increased 19% to $35.7 million, and adjusted earnings per share rose to $1.33 from $1.08 in the prior year.
At 12.4x forward earnings, Calavo stock trades at a discount to many food distributors, potentially offering value if the Prepared segment momentum continues and Fresh segment challenges prove temporary.
However, investors should recognize that the structural headwinds of declining sales and thin margins won’t disappear overnight.
The combination of regulatory resolution, legal victories, and strong Prepared segment growth could stabilize the stock in the coming quarters. Still, the Fresh segment needs to show improvement for Calavo stock to recover sustainably.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
