Can Mission Produce Handle Margin Pressures From Mexico Supply?

Mission Produce AVO faced margin pressures in the second quarter, largely due to early-quarter difficulties in sourcing avocados from Mexico, a critical supplier in its global network. This supply challenge negatively impacted per-unit margins, particularly as demand remained high and pricing was elevated. However, the company responded with agility, leveraging its diversified sourcing strategy by turning to California and Peru to supplement Mexican supply. By mid-March, the situation began to normalize as alternative sources came online, helping restore balance in sourcing and stabilize margins for the remainder of the quarter.

AVO’s long-term investments in infrastructure and its global network proved critical during this volatile period. The company’s vertically integrated model allowed it to adjust operations quickly, including shifting volumes to its own packhouses and reducing reliance on co-packers. Notably, Mission Produce is adding additional capacity in Mexico using existing equipment, which should reduce future bottlenecks without incurring significant capital outlay. These steps are essential for offsetting any sustained limitations from Mexico and ensuring a more resilient supply chain amid political or economic disruptions such as tariffs.

Mission Produce is well-positioned to mitigate margin pressures as supply stabilizes. The expected 150% increase in avocado production from its Peruvian orchards in the second half of fiscal 2025 should ease dependence on Mexico while also providing a cost advantage. Additionally, the company expects more normalized industry pricing as global volumes rise, which could support margin recovery. Backed by deep grower relationships, diversified sourcing and flexible logistics, Mission Produce is proving it has the operational tools to handle supply volatility from Mexico while maintaining its growth trajectory.

AVO Faces Stiff Competition From CVGW & FDP

Calavo Growers, Inc. CVGW and Fresh Del Monte Produce Inc. FDP are two key competitors in the fresh produce industry, each leveraging distinct strategic advantages.

Calavo, with a sharp focus on avocados and a growing prepared foods business, maintains strong grower relationships and a vertically integrated model that enhances supply chain control and margin stability. The company sources avocados primarily from Mexico, California and other Latin American countries, giving it year-round availability and flexibility in procurement. Its vertically integrated operations, from sourcing and packing to distribution and value-added processing, allow Calavo to maintain quality standards and react swiftly to market demand or supply chain disruptions.

Fresh Del Monte leverages a broad portfolio, global logistics and a vertically integrated supply chain to serve customers in over 90 countries, gaining efficiency through scale. However, it lacks the avocado-specific infrastructure and ripening capabilities that set Mission Produce apart. Mission Produce’s end-to-end control from farms to ripening and distribution enables cost management, supply consistency and rapid response to market shifts, offering a strategic edge over more generalized competitors like Fresh Del Monte.

AVO’s Price Performance, Valuation & Estimates

Shares of Mission Produce have gained 21.1% in the past three months compared with the industry’s growth of 12.7%.

From a valuation standpoint, AVO trades at a forward price-to-earnings ratio of 24.91X, significantly above the industry’s average of 14.94X.

The Zacks Consensus Estimate for AVO’s fiscal 2025 and 2026 earnings suggests a year-over-year decline of 20.3% for both years. The estimates for fiscal 2025 and 2026 have been unchanged in the past seven days.

AVO stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research