On Wednesday, Jefferies updated its stance on Calavo Growers (NASDAQ:CVGW), increasing the stock's price target to $31 from the previous $30 while maintaining a Hold rating. The firm's analysis is based on the anticipated divestment of Calavo Growers' Prepared Foods business. This strategic move is expected to transform the company into a more focused entity with higher margins and a simplified business structure.
The analyst from Jefferies has predicted that Calavo Growers will benefit from a cleaner balance sheet and additional savings in selling, general and administrative expenses (SG&A) after the divestment is completed. The forecast improvement in profitability is anticipated as the year progresses, with expectations that the company will find greater stability going forward, especially with the return of Lee Cole as CEO.
The firm's position remains cautious, opting for a Hold rating as it awaits more consistent improvements in the company's base fundamentals. Jefferies is also looking for the conclusion of an ongoing investigation before changing their perspective on the stock.
Calavo Growers' decision to divest its Prepared Foods segment is a significant step in streamlining its operations. The company aims to focus more on its core offerings, which is expected to lead to increased efficiency and profitability.
In summary, while Jefferies has shown optimism regarding the strategic changes at Calavo Growers, it prefers to observe the company's performance over a longer period before considering any rating upgrades. The firm is specifically interested in witnessing sustained fundamental improvements and the resolution of the current investigation.
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