Mission Produce forecasts avocado price stabilisation as Mexican supply eases

Mission Produce (AVO) has outlined a path towards stabilising avocado prices for the upcoming fiscal third quarter, attributing the expected recovery to a reduction in Mexican supply and the onset of the Peruvian harvest. The company anticipates that average avocado pricing will decline by approximately 15 per cent year-over-year for the quarter. This represents a marked improvement from the 30 per cent and 36 per cent drops recorded in the first and second quarters of the fiscal year, respectively, which were driven by a significant supply glut from Mexico.

Management has provided guidance for adjusted EBITDA of between $84 million and $88 million for the second half of the fiscal year. This forecast is underpinned by a record Peruvian harvest, which is expected to reach 120 million to 130 million pounds, up from 105 million pounds in the prior year. The company’s own fruit from Peru carries higher margins, and with most sales falling in the fourth quarter, management projects EBITDA for that period to reach approximately $56 million, compared with about $42 million a year earlier.

The recent completion of the $465 million acquisition of Calavo Growers in May is also expected to bolster the company’s financial performance. The deal adds two Mexican packhouses to Mission Produce’s operations, expanding its capacity from two to four facilities in the country. This expansion allows the company to handle increased volumes in-house, reducing reliance on third-party packing services that strained profitability during the recent supply surge. Furthermore, Calavo diversifies the product portfolio into prepared foods, tomatoes, and papayas, with the prepared foods business having grown 12 per cent year-over-year.

Investor sentiment has shifted positively, with increased activity from both insiders and institutional funds. Directors Bruce Taylor and Jay Pack purchased shares in June, while Globalharvest Holdings Venture, the company’s largest shareholder, acquired roughly 2.4 million shares in July. Institutional positioning has also strengthened, with 20 funds holding stakes in the first quarter, including significant increases by Balyasny Asset Management, AQR Capital Management, and Millennium Management.

Analysts currently value the stock at approximately $16.50 per share, suggesting roughly 29 per cent upside from current levels. This valuation is based on a 11.9 times forward EV/EBITDA multiple, which is about 12 per cent below the stock’s five-year average. The calculation applies this multiple to projected fiscal 2027 EBITDA of $152 million, adjusted for $350 million in term loan debt and 88.3 million shares outstanding.

While the acquisition softens commodity swings, avocados will still account for about 85 per cent of Mission Produce’s revenue. The company faces ongoing risks, including weather variability in Peru and Mexico, and customer concentration, with the top ten customers comprising 67 per cent of fiscal 2025 sales. However, the combination of seasonal supply shifts and operational efficiencies from the Calavo integration positions the company for a stronger second half, with fiscal Q3 results scheduled for release in September.