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Analysts remain bullish on Costa Group (ASX:CGC) after CEO quits

Analysts remain mostly bullish on Costa Group (ASX:CGC) shares following the abrupt exit of its CEO. Costa shares fell almost 15% on Monday to AU$2.18, hitting their lowest point in over six years, following the executive transition update. Costa is a leading Australian supplier of fruits and vegetables.

CEO Sean Hallahan steps down, former boss steps up

The company announced that its CEO Sean Hallahan stepped down on Monday. The announcement went on to state that the executive will stay on through mid-October to assist with a transition plan. Hallahan became Costa’s CEO in March 2021, after previously serving as the company’s chief operating officer. Hallahan leaves after spending five years with the company.

“Under Sean’s leadership Costa has performed extremely well during a challenging period with global Covid-19 disruptions and extreme weather conditions being successfully navigated and is in a strong financial position,” said Neil Chatfield, Costa’s board chairman.

Costa has brought back its former CEO Harry Debney to take over from Hallahan temporarily. Debney, who led the Costa to its 2015 IPO, served as the company’s CEO from 2010 until 2021.

“Harry has an intimate knowledge of the company and is regarded as one of Australia’s leaders in horticulture. Harry is the right person to assist the company as it transitions to a new CEO,” added Chatfield. The chairman also said the company would begin a search for a permanent CEO.

Costa Group share price forecast

The abrupt CEO exit shocked the market and caused Costa shares to pull back sharply, deepening the stock’s year-to-date losses to more than 27%. It seems analysts may believe the recent declines in Costa shares present a buy-the-dip opportunity.

According to TipRanks’ analyst rating consensus, Costa Group stock is a Strong Buy based on seven Buys and two Holds. The average Costa share price target of AU$3.22 implies over 47% upside potential. The stock currently offers an above-average dividend yield of 4.12%.

Costa stock is also receiving positive mentions on financial blogs. TipRanks data shows that financial blogger opinions are 70% Bullish on Costa, compared to a sector average of 74%.

Concluding thoughts

Costa expects the transition to be smooth, considering the outgoing CEO has agreed to stay on to help with the handover. Additionally, interim CEO Debney is familiar with the company and should be able to hit the ground running. Moreover, a staple food supply company like Costa is likely to be more resilient than discretionary goods suppliers in the advent of a recession.

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