Calavo Growers (CVGW, Financial), a global industry leader in international consumer goods and farm products, reported record fiscal fourth-quarter and full-year 2016 results.
Calavo operates under three business segments: Fresh, Renaissance Foods Group (RFG) and Calavo Foods. The Fresh segment witnessed increased revenue and gross profit. The RFG segment's top line expanded by double-digits for the 21st consecutive quarter.
The Fresh segment had exceptional performance in fiscal 2016. Revenues, the gross margin, net income and EPS reached new record levels. It witnessed a solid revenue increase in the last quarter.
Fourth-quarter performance
Net income during the quarter was $9.2 million, a 93% increase from $4.8 million the year before. The gross margin increased by 34% to $27.1 million, up from $20.2 million in the prior-year quarter.
The company also reported gross margins for each segment. It reported $15.15 million for Fresh, $4.5 million for Calavo Foods and $7.3 million for RFG.
Revenues were $247.7 million during the fourth quarter, a 19% increase from $208 million the previous year. The company recorded sales of $143.3 million for Fresh, $16.3 million for Calavo Foods and $87.8 million for RFG.Â
Diluted EPS for the quarter was 53 cents, up from 28 cents in the prior-year quarter.
Operating income during the quarter was $15.5 million, an increase from $8.7 million a year ago.
Full-year results
Net income for the year was $38 million, an increase of 40% from $27.2 million.
Diluted EPS for the year was $2.18, up from $1.57 the year before.
Revenue for the year was $935.7 million, a 9% increase from $856.8 million last year.
Focus
- Invest substantially in its multi-platform model
- Optimization of new manufacturing facilities
- Improvement in gross margin
- Diversification
- Robust product development
Conclusion
Founded in 1924, Calavo is a provider of value-added fresh food. The company is witnessing solid growth from the infrastructure investments it has made. Management expects FreshRealm and the three principal business segments to experience revenue and profit growth in 2017.
The company is continuously innovating and adding new products. In a bid to diversify, it is expanding into new avocado-growing regions. Record revenue, gross margin, net income and per-share results are going to propel the company’s upward trajectory.
The avocado industry is currently showing upward trends and the company is well positioned to cater to this huge global appetite. The company is also expanding into the refrigerated fresh packaged goods category though RFG. Calavo's portfolio of products and innovation are key to its success.
With the current pace, the business is expected to post double-digit revenue growth and an increase in gross margin. It has a strong and flexible balance sheet with low long-term debt. In 2016, the company managed to internally generate net income growth of nearly 40%. In spite of higher food costs, Calavo performed well. In regard to dividends, the company's dividend  has increased by over 300% since 2002. I think adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
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