What Happened:
Shares of avocado company Mission Produce (NASDAQ:AVO) jumped 22.8% in the morning session after 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.
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What is the market telling us:
Mission Produce’s shares are not very volatile than the market average and over the last year have had only 8 moves greater than 5%. Moves this big are very rare for Mission Produce and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 13.3% on the news that the company reported first-quarter results that blew past analysts' revenue and EPS expectations. Its gross margin also outperformed Wall Street's estimates. Management expressed satisfaction with the performance, specifically margins, adding, "The team's focus resulted in significantly improved per-unit margins, which translated to nearly 700 basis points of gross margin expansion and resulted in a significant improvement in adjusted EBITDA performance year-over-year." Zooming out, this was an impressive quarter that should delight shareholders.
Mission Produce is up 25.3% since the beginning of the year, and at $12.95 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 $939.77.
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