Avocado consumption continues to grow in the U.S. as the food finds its way into more dishes across the country. However, growers and producers of the commodity have been relatively sluggish as of late, best represented by one of the top names in the business, Calavo Growers (Nasdaq:CVGW-Free Report).
Calavo is a small cap based out of California that is involved in a number of farm products. The company has a focus on avocados, and also guacamole, in addition to a small lineup of other perishable commodities like papayas and pineapples.
The firm has a decent long term performance, as the stock is up by more than 41% in the past two years, though recent trading has been choppier. In fact, until a recent earnings report, CVGW was under pressure after a short string of earnings misses sent the stock price reeling. However, the most recent earnings report sent the stock soaring, and gave new hope to investors to close out the year.
In the most recent report, Calavo crushed estimates reporting earnings of 48 cents a share compared to a projection of 37 cents a share. Revenues were also strong—rising by more than 25% (yoy)—while the company appears well positioned to steal share in the avocado segment going forward.
Although the consumer is still relatively strong, the restaurant sector has been pretty mixed lately. Some companies have been able to do quite well in this environment, and see their share prices surge, while others, such as Ruby Tuesday's (NYSE:RT-Free Report), have definitely struggled.
Ruby Tuesday's is best known for its lineup of casual dining restaurants under the Ruby Tuesday brand name. The firm has about 800 restaurants in total, including several dozen international locations as well.
Ruby Tuesday's saw strong growth and was a consumer darling leading up to the financial crisis—thanks in large part to their solid menu and salad bar—but it hasn't really recovered from the Great Recession. The stock is flat over the past five years, while competitors like Dardenor even McDonald'shave seen strong gains.
While the others have adapted to changing consumer tastes and have managed to expand operations, Ruby Tuesday's has stagnated and now its earnings picture is in trouble.
Natural Gas Supplies Continue to Build
The U.S. Energy Department's weekly inventory release showed an in-line rise in natural gas supplies. However, on a bearish note, the storage build was ahead of the benchmark 5-year average gain for the week.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data
Sep 6, 2013
Following past week's build, the current storage level – at 3.253 trillion cubic feet (Tcf) – is now 46 Bcf (1.4%) above the 5-year average. However, supplies are still down 172 Bcf (5.0%) from the last year's level.
Natural gas stocks hit an all-time high of 3.929 Tcf in 2012, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remained robust. In fact, the oversupply of natural gas pushed down prices to a 10-year low of $1.82 per million Btu (MMBtu) during late Apr 2012 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana).
However, things started to look up in 2013. This year, cold winter weather across most parts of the country boosted natural gas demand for space heating by residential/commercial consumers. This, coupled with flat production volumes, meant that the inventory overhang was gone, thereby driving commodity prices to around $4.40 per MMBtu in Apr – the highest in 21 months.
During the last few weeks, though, natural gas demand has gone through a relatively lean period, as mild weather prevailed over the country, leading to tepid electricity draws to run air conditioners. This has led to a slide in the commodity's price. In fact, healthy injections over last few weeks, plus strong production have meant that supplies have overturned the deficit over the five-year average.
) – both Zacks Rank #3 (Hold) stocks – would also benefit from the improved fundamentals, they are large-cap, low-beta entities with slow price action.
As such, we advise investors to accumulate Carrizo shares, which sports a Zacks Rank #1 (Strong Buy). With the financial incentive to produce the commodity and the subsequent improvement in the company's ability to generate positive earnings surprises, it has the potential to rise significantly from current levels.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.