What happened

Shares of Calavo Growers (CVGW 2.07%) were taking a dive today after the avocado grower badly missed estimates in its fourth-quarter earnings report.

As of 10:51 a.m. ET, the stock was down 14.2% on the news.

So what

Revenue in the quarter declined 11% to $243.6 million, which badly missed estimates at $298 million as the company was hit by falling avocado prices, which declined 20% as volumes also fell 4%.

Despite the decrease in revenue, Calavo saw an improvement in its prepared foods segment, which includes guacamole and fresh-cut fruit, and that lifted gross profit up from $9.1 million in the quarter a year ago to $20.4 million.

However, selling, general, and administrative expenses rose slightly, and the company finished the quarter with adjusted earnings per share of just $0.03. That was better than an adjusted loss per share of $0.08 in the quarter a year ago, but well below the analyst consensus at $0.33. 

CEO Brian Kocher credited the momentum in the prepared segment for improved results in the quarter, but said in a statement, "Earnings were moderated by the Grown segment, which had a slower than anticipated recovery from the challenging market conditions that occurred late in the third quarter."

Now what

Calavo didn't give specific guidance for the new fiscal year but said it expected the Mexican avocado crop to be 10% to 20% larger this year. That should continue to weigh on prices, though the company said it's still targeting $3 to $4 in gross profit per carton of avocados.

Analysts had been expecting a rebound in profits this year, though that could be challenged by lower prices. The company also said its Project Uno profit improvement initiative, which is focused on SKU (stock-keeping units) rationalization, streamlining procurement, and pricing initiatives, is delivering promising results.

Despite that, the pricing headwinds are clearly overwhelming any internal improvements in the business, and the sell-off on such a wide miss is understandable.