What Happened?

Shares of avocado company Mission Produce (NASDAQ: AVO) jumped 6.7% in the morning session after the company reported strong second-quarter financial results that surpassed Wall Street's expectations. 

The company's performance was driven by a 10% increase in avocado sales volume. This led to an adjusted profit of $0.26 per share, a 13% increase from the previous year and significantly beating analyst estimates by $0.11. Further demonstrating its financial health, Mission Produce reported adjusted EBITDA (a measure of profitability) of $32.6 million, while its gross profit margin improved by 120 basis points year-on-year to 12.6%. The positive results were attributed to the company's vertically integrated model and its ability to maintain a consistent, year-round supply.

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What Is The Market Telling Us

Mission Produce’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 12 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. 

Moving on, the company expects the topline 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 down 3.2% since the beginning of the year, but at $13.73 per share, it is still trading close to its 52-week high of $14.45 from December 2024. 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 $994.93.

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