Higher avocado prices lifted the produce business’s fiscal Q3 results.
Shares of Mission Produce (AVO 21.52%) jumped Tuesday after the avocado, mango, and blueberry business reported results for its fiscal 2024 third quarter. As of 1:30 p.m. ET, Mission Produce stock was up by a whopping 19.3%.
High prices are a good thing for Mission Produce
Prices for fresh produce can fluctuate greatly, but prices were working in Mission Produce’s favor in its fiscal Q3, which ended July 31. During that period, its revenue was predominately generated by its avocados, and sales volume for those was down 10% year over year, which isn’t ideal. But avocado prices were up a whopping 36%, which contributed to a 24% boost in the company’s revenue — a greater gain than expected.
Mission Produce’s management expects avocado prices to come down in the fourth quarter, although they’ll still be higher than in the fourth quarter of last year. This will help boost revenue. Turning from avocados to blueberries, sales volume is expected to grow but prices will be lower, which means blueberries likely won’t contribute to revenue growth.
Still, higher prices for avocados were enough to keep investors optimistic about Mission Produce.
What now?
It may trade at a little less than 1 times sales but I believe Mission Produce stock is fairly valued here. This business can be unpredictable due to uncertainty regarding the size of harvests and the impacts on pricing. But the company is doing well right now, having earned $37 million in operating income through the first three quarters of its fiscal year.
Mission Produce shareholders just need to be comfortable with volatility. Produce prices can swing higher or lower due to factors that are outside of management’s control, which can impact business results and the stock price.
