BB&T Reiterates Buy On Calavo Growers (CVGW)

BB&T Capital Markets is reiterating its Buy rating and $27 price target on shares of Calavo Growers, Inc. CVGW. In a note sent to clients, BB&T writes, "Q4 avocado volumes have been extremely strong. We estimate that blended volumes likely increased 75%+ for the quarter, although our estimate is based upon an increase of less than 50%. We believe sales for the Calavo Foods segment also grew at a nice clip during the quarter boosted by strong sell-through of guacamole at retail, as well as new distribution gains for the Salsa Lisa product. Avocado margins will likely not be as strong as in Q3 as fixed costs in Q4 are typically higher due to both the Mexican and Californian operations running. However, we believe margins will be dramatically higher than Q4 last year. Calavo Foods margin should be much better than Q3 as fruit costs abated somewhat during the quarter. The company has raised pricing on its guacamole product, but the higher pricing did not benefit Q4. We would expect margins to be fully recovered in Q1/Q2." Shares of CVGW closed at $23.14 on Friday.