Calavo Growers Inc. welcomed a new chief executive and a new board chairman this month.
Brian Kocher took over as the new head of the Santa Paula avocado and fresh food grower and distributor effective Feb. 1. He replaced interim chief executive Steve Hollister, who will return to serving on the board, where he was named chairman.
J. Link Leavens, who had served as chairman since March 2020, will remain on the board, the company said in a release.
Kocher said he was thrilled to join and lead Calavo for its next phase of growth and transformation.
“I’m excited about the actions and initiatives that are in place and look forward to accelerating the impact of those initiatives while capitalizing on consumer trends that support Calavo’s growth,” Kocher said in a statement at the time his appointment was announced in December. “Most importantly, I am honored to join a team focused on the success of our customers and each other.”
In his last earnings conference call from December, Hollister said that while last year was difficult and challenging, Calavo finished the fourth quarter and the 2021 fiscal year strong and that it was off to a good start in fiscal 2022.
“As we entered the fourth quarter, market conditions that we experienced in the third quarter continued,” Hollister said during the call with analysts. “Labor shortages, suboptimal raw materials at higher prices and high freight costs weighed on the business.”
But as the fourth quarter went on, market conditions improved along with the ability to manage them, he added.
“We saw sequential improvement from August through October, and we continue to see this improvement as we sit today about halfway through (the first quarter),” Hollister continued.
Calavo reported on Dec. 20 an adjusted net loss of $1.4 million (-8 cents a share) for the quarter ending Oct. 31, compared with adjusted net income of $6 million (34 cents) in the same period a year earlier. Revenue increased by 17 percent to $273 million.
In the last 52 weeks, the share price has lost about 44 percent of its value when it closed at $41.95 on Feb. 15. Shares closed at $40.38 on Feb. 23.
The company will report its fiscal first quarter earnings on March 9.
‘Hold’ ratings
Two analysts who follow Calavo gave the stock a “hold” rating in their most recent research notes on the company.
Mitch Pinheiro, an analyst with Sturdivant & Co. Inc. who tracks food, beverage and consumer goods, pegged the target price at $53 a share.
“While our $53 price target suggests attractive upside over the next 12 months, we believe the near-term will be choppy and prefer to remain on the sidelines,” Pinheiro wrote in the report.
He noted that revenue was up more than expected, driven mostly by the Fresh Products business segment, which had sales of $149 million, about a 26 percent increase over the fourth quarter of the prior year.
“Margins were a different story – gross profit compressed 550 basis point and was below our estimate due to higher fruit, labor and freight costs,” Pinheiro said.
Rob Dickerson, an analyst with Jefferies, wrote in his report that the price target on Calavo shares was $47, which the firm valued off the 2022 earnings before interest, taxes, depreciation and amortization estimate of $47 million and an approximate 15 times enterprise value/EBITDA multiple, a premium for the company based on recovery potential, per capita end-market demand and margin upside potential relative to pre-pandemic levels.
“Holding that valuation, however, will be contingent on management’s ability to communicate the longer term growth potential of Calavo, which we’d expect to hear from CEO Kocher after he has time to settle into the company and communicate the runway,” Dickerson said in the note.
Prior to joining Calavo, Kocher had been with the Castellini Group of Cos. in Wilder, Kentucky, one of the largest fresh produce distributors in the U.S. Before that he served in various executive positions, including chief financial officer, chief operating officer and interim chief executive, at Chiquita Brands International Sarl, a producer and distributor of bananas and other produce based in Fort Lauderdale, Florida.
“Brian’s deep knowledge, expertise and operational leadership in the fresh produce industry as a CEO, COO and CFO make him uniquely qualified to lead Calavo forward and position our company for growth,” said Leavens, the former board chairman, in a statement from December. “We are delighted to welcome Brian to our talented team.”