AVO Q3 Deep Dive: Global Volume Growth and Margin Stability Amid Market Pricing Challenges

Avocado company Mission Produce (NASDAQ:AVO) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales fell by 10% year on year to $319 million. Its non-GAAP profit of $0.31 per share was 34.8% above analysts’ consensus estimates.

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StockStory’s Take

Mission Produce’s third quarter was marked by strong execution, as volume growth and effective global operations helped the company outperform Wall Street’s expectations, driving a positive market reaction. Management highlighted that a 13% increase in avocado sales volumes, particularly in Europe and Asia, offset the impact of lower average pricing caused by increased global supply. CEO Steve Barnard credited the company’s integrated sourcing and distribution platform for enabling flexibility to shift product to the most favorable markets, while President John Pawlowski noted that Peruvian orchards’ recovery from previous weather disruptions played a significant role in the quarter’s results.

Looking ahead, Mission Produce’s management is focused on leveraging its completed infrastructure investments to drive future growth and free cash flow generation. President John Pawlowski stated that the company will prioritize expanding avocado household penetration in North America and deepening its reach in Europe using Peruvian and Guatemalan supply. CFO Bryan Giles emphasized the company’s intent to balance growth-oriented investments with disciplined capital allocation, foreseeing a step-down in capital expenditures and the potential for increased promotions during periods of abundant supply. Management believes these strategies will support continued volume growth and margin stability, even as industry pricing remains volatile.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust international sales growth, vertical integration in Peru, and a focus on operational discipline as capital investments wind down.

• International volume momentum: Mission Produce achieved significant volume gains in Europe and Asia, driven by targeted investments in infrastructure and expanded relationships with major retailers. Management emphasized that European volumes increased by 40%, supported by enhanced operations in the United Kingdom and Southern Europe.
• Peruvian orchard recovery: The return to normal growing conditions in Peru resulted in doubled exportable avocado production, which allowed Mission to capitalize on higher yields and direct supply to the most profitable regions. Management pointed to this vertical integration as a core competitive advantage.
• Blueberry expansion: New blueberry acreage in Peru began contributing to higher volumes, though short-term profitability was impacted by lower yields per hectare as the new plantings mature. Management expects these investments to pay off over time as yields improve.
• Mango market share gains: The company increased its U.S. mango market share to 5.2%, up 150 basis points from last year, and sees long-term potential in the category as household penetration grows. Management is applying the same playbook used for avocados to build scale and engagement in mangoes.
• Capital allocation shift: With its major infrastructure build-out completed, Mission is entering a period of lower capital spending and expects to generate stronger free cash flow. Management described this as a reflection point, offering more flexibility to pursue both organic and inorganic growth opportunities.

Drivers of Future Performance

Mission Produce expects abundant industry supply and completed infrastructure investments to shape its near-term outlook, with plans to boost volume and household penetration.

• Promotional activity in low-price cycle: Management anticipates a higher industry supply of avocados, which is likely to result in lower average prices. President John Pawlowski explained that this environment creates opportunities for increased promotional activity with retailers, aiming to accelerate household penetration in North America.
• International market expansion: The company plans to deepen its presence in Europe by leveraging Peruvian and upcoming Guatemalan supply, with a focus on operational efficiencies and maximizing the use of existing assets. Management sees these regions as key contributors to future volume growth and profitability.
• Disciplined capital allocation: CFO Bryan Giles highlighted a shift to lower capital expenditures following years of heavy investment, targeting approximately $40 million in spending next year—split evenly between maintenance and growth. Management will monitor weather and crop risks but is confident in the business’s ability to generate strong free cash flow in various scenarios.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace of avocado and mango volume growth in North America and Europe, (2) the effectiveness of promotional campaigns in driving household penetration during periods of lower pricing, and (3) the maturation of new blueberry acreage and its impact on segment profitability. The team will also monitor how management balances growth investment with free cash flow generation as capital spending declines.

Mission Produce currently trades at $13.28, up from $13.13 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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