What Happened?
Shares of avocado company Mission Produce (NASDAQ:AVO) jumped 21.6% in the morning session after the company reported strong third-quarter results, which blew past analysts' revenue, gross margin, EBITDA, and EPS expectations. These beats were mostly driven by pricing, as average per-unit avocado sales prices increased by 36%. Zooming out, we think this quarter featured some important positives.
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What The Market Is Telling Us
Mission Produce’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for Mission Produce and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 22.8% on the news that the company reported second-quarter earnings that blew past analysts' revenue, adjusted EBITDA, and EPS expectations. Despite the difficult macro environment (including challenges in its farming operations in Peru due to poor growing conditions caused by El Niño and disruptions in Mexico), revenue grew 24% year on year, benefiting from a 36% increase in avocado prices. The improved pricing was reflected in profitability ratios as EBITDA grew by 49% year on year. It turned out that consumers might also be developing a sweet tooth for other fruit, as volumes in the mango category saw a 40% increase, with revenues doubling to $14 million.
Looking ahead, the company expects the top line to be impacted by the issues in Peru, with avocado volumes projected to be flat to slightly lower than industry volumes in the fourth quarter. However, avocado prices are expected to remain elevated relative to the previous year, likely offsetting the anticipated volume decline. Overall, this was a solid quarter. Peer Calavo (CVGW) also had a constructive quarter.
Mission Produce is up 44.5% since the beginning of the year, and at $14.96 per share, has set a new 52-week high. Investors who bought $1,000 worth of Mission Produce’s shares at the IPO in September 2020 would now be looking at an investment worth $1,084.
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