Stephens has lowered its price target for Calavo Growers (NASDAQ:CVGW) to $27.00 from the previous $28.00, while keeping its Equal Weight rating intact. The revised target closely matches the current trading price of $27.04, though data from InvestingPro indicates that Calavo Growers may still be undervalued relative to its fair value estimate.
This downward adjustment follows Calavo's fourth-quarter 2025 results, which slightly missed analyst expectations. The key driver behind the softer performance was the Fresh segment, which faced reduced pricing and volume pressures. Conversely, Calavo's Prepared segment delivered robust results that partially offset the softness. Despite these mixed outcomes, the company sustained profitability with diluted earnings per share (EPS) of $1.11 over the trailing twelve months, although its gross profit margin was modest at 9.82%.
Stephens highlighted that Calavo's management is making "tangible progress" in enhancing the Prepared division. However, the Fresh business continues to face challenges stemming from commodity price fluctuations and near-term operational obstacles. These vulnerabilities have constrained the segment's margin and revenue performance.
Overshadowing the quarterly financials was the announcement of Mission Produce's agreement to acquire Calavo Growers. Stephens described this move as a logical strategic alignment, stemming from complementary sourcing, distribution, and value-added capabilities across both companies. Pending standard regulatory approvals, the acquisition is expected to help Calavo stabilize its earnings profile through realized integration synergies.
Additional details from Calavo's Q4 earnings reveal adjusted EPS of $0.25, falling short of the $0.38 estimate. Quarterly revenue totaled $124.7 million, significantly below consensus forecasts of $153.7 million and declining from $170 million in the same quarter last year. The company attributed this revenue decline primarily to lower avocado prices and reduced volumes in the Fresh segment.
The upcoming merger with Mission Produce represents a pivotal development for Calavo Growers, with implications for the company's operational strategy going forward. Investors remain attentive to how the integration will unfold amid this challenging market backdrop.