Seeking Alpha

Avocado market leader still a Buy despite margin pressure: Wedbush

  • "A sharp avocado price increase could drive revenue upside but negatively impact EPS," Wedbush says, commenting on Buy-rated Calavo Growers (CVGW -1.5%).
  • Analyst Kurt Frederick notes that the avocado harvest was delayed by rain, an event which conspired with heavy demand to drive "quarterly avocado prices up 40-50% over 2012 levels, a sharp reversal from decreases seen in the first half of 2013."
  • Frederick sees "Q4 revenue of $186M and EPS of $0.39" — that's roughly in-line with consensus on the top-line and below Q4 2012 on the bottom-line.
  • The negative Y/Y EPS growth is attributed to "anticipated margin impact from higher avocado prices."
  • Still, Wedbush likes the company's market-leading position. Price target lifted to $35 from $33.
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