What Happened?
Shares of avocado company Mission Produce (NASDAQ: AVO) fell 7% in the morning session after the company reported third-quarter results that beat profit expectations but provided a weak forecast for avocado prices.
While the company posted earnings per share of $0.26, doubling the consensus estimate of $0.13, the positive result was overshadowed by its forward-looking guidance. Mission Produce management stated they expect avocado pricing to be approximately 20% to 25% lower in the fourth quarter compared to the same period last year. The company attributed the anticipated price decline to higher avocado volumes being available in both U.S. and international markets, a trend confirmed by reports of increased supply from key producers in Mexico and Peru. This weaker pricing outlook is raising investor concerns about the company's future profitability, despite the strong quarterly earnings beat.
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What Is The Market Telling Us
Mission Produce’s shares are not very volatile and have only had 7 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 previous big move we wrote about was 1 day ago when the stock gained 6.7% on the news that 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.
Mission Produce is down 15.6% since the beginning of the year, and at $11.97 per share, it is trading 17.2% below 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 $867.39.
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