Calavo Growers (NASDAQ:CVGW) will release its quarterly report on Thursday, and after a big share-price jump during the winter and spring months, the stock has essentially given back all of its gains for the year. Even if Calavo earnings do post the modest increase that investors expect to see, the question will remain whether the company can turn more of its revenue growth into higher profits going forward.

Calavo is a specialized giant in the produce industry, best known for its avocados. With shoppers interested in higher quality fruits and vegetables, Calavo has had an opportunity to deliver greater value from its avocado, papaya, and guacamole offerings. Yet not everyone is convinced that the company can count on the healthy-food craze boosting its results. Let's take an early look at what's been happening with Calavo Growers over the past quarter and what we're likely to see in its report.

Stats on Calavo Growers

Analyst EPS Estimate

$0.39

Change From Year-Ago EPS

2.6%

Revenue Estimate

$189.17 million

Change From Year-Ago Revenue

23.5%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Will Calavo earnings fall short again this quarter?
With analysts having gotten burned in previous quarter, they've cut their views on Calavo earnings substantially in recent months. A nickel-per-share reduction in July quarter estimates is just part of a greater than $0.25 per share cut for full fiscal year projections. The stock has also given up substantial gains, falling almost 20% since late May.

Calavo's struggles became apparent early on in the quarter, when the company announced fiscal-second quarter results that disappointed investors. Even though efforts to promote the sale of fresh avocados led to 40% higher fresh-avocado volume and 20% higher revenue for the quarter, the costs of those promotions hurt Calavo's profits, falling about 12% from year-ago levels. Shareholders didn't take heart from Calavo's assertions that the company should do better during the second half of the year because of expected improvements in demand.

But Calavo is hoping to use the power of the Internet to help boost its prospects in the long run. Earlier this year, the company launched its FreshRealm distribution-technology company, with the goal of allowing both large and small retailers as well as food banks and other community organizations to connect to a network of fresh-food producers. The hope is that FreshRealm will make it easier for Calavo to expand its presence in the industry by making its products more available to customers.

One question facing Calavo is whether its expected gains from what it called "blue-chip customers" will lead to better results. The company didn't name those customers, but the fresh-food trend has arguably made Whole Foods Market (NASDAQ:WFM) the most desirable target for any fruit producer to seek a growing relationship. Up-and-coming peer Limoneira (NASDAQ:LMNR) also sells avocados as well as various citrus fruits, and both companies have enjoyed substantial sales gains in a generally favorable environment for the industry, thanks in part to a cross-equity agreement in which Calavo and Limoneira own substantial equity positions in each other's stock.

In the Calavo earnings report, look to see whether the company's anticipated gains actually lead to better profits. Sales growth is a good sign of demand, but in order for investors to see share-price gains, Calavo will have to demonstrate its ability to get costs under control and move margins back upward to pull more of its revenue down to the bottom line.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.