Mission Produce (NASDAQ:AVO) Misses Q4 Sales Targets

Radek Strnad /
2023/12/21 4:13 pm EST

Avocado company Mission Produce (NASDAQ:AVO) missed analysts' expectations in Q4 FY2023, with revenue up 8.4% year on year to $257.9 million. It made a non-GAAP profit of $0.11 per share, down from its profit of $0.13 per share in the same quarter last year.

Key Takeaways from Mission Produce's Q4 Results

Volumes missed expectations based "on continued weather-related challenges in Peru" , leading to a revenue shortfall vs. Consensus expectations. However, gross margin was in line and operating expenses were lower than expected, leading to a slight EPS beat. Overall, this was a mixed quarter for Mission Produce. Looking ahead, management mentioned that pricing should be a tailwind to revenue. The stock is flat after reporting and currently trades at $9.57 per share.

Is now the time to buy Mission Produce? Find out by accessing our full research report, it's free.

Mission Produce (AVO) Q4 FY2023 Highlights:

  • Market Capitalization: $654.1 million
  • Revenue: $257.9 million vs analyst estimates of $288.5 million (10.6% miss)
  • EPS (non-GAAP): $0.11 vs analyst estimates of $0.10 (10% beat)
  • Free Cash Flow of $33.7 million, up from $6.7 million in the previous quarter
  • Gross Margin (GAAP): 10.8%, down from 11.3% in the same quarter last year (in line)
  • Sales Volumes were down 4% year on year (miss)

Steve Barnard, CEO of Mission, commented, “Our fourth quarter results saw improved top and bottom-line performance driven by strength in our Marketing and Distribution segment, further supported by substantial growth in our emerging Blueberries segment. However, continued weather-related challenges in Peru resulted in quality issues towards the latter end of the season and lower than expected volumes, both of which impacted our International Farming segment performance. Because we set our fixed price contracts with customers and market allocation prior to experiencing these weather-related events, we were limited in our ability to generate the seasonal increase in adjusted EBITDA that we would typically expect in the fourth quarter.”

Founded in 1983 in California, Mission Produce (NASDAQ:AVO) grows, packages, and distributes avocados.

Packaged Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

Mission Produce is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 3.4% over the last three years was mediocre for a consumer staples business.

Mission Produce Total Revenue

This quarter, Mission Produce's revenue grew 8.4% year on year to $257.9 million, missing Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 5.6% over the next 12 months, a deceleration from this quarter.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Mission Produce's average quarterly volume growth was a healthy 1.3% over the last two years. This is pleasing because it shows consumers are purchasing more of its products. Mission Produce Year-On-Year Volume Growth

In Mission Produce's Q4 2023, sales volumes dropped 4% year on year. This result was a reversal from the 6% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn't deter you from investing in a business. We'll be monitoring the company to see how things progress.

Mission Produce may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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