Freedom Broker: synergies with Calavo will lift Mission Produce’s share price

Freedom Broker analysts reaffirm a “Buy” rating on Mission Produce (AVO) shares and a $16 price target. At the current price of $13.2 per share, the upside potential is 21.21%. The positive view is driven by business expansion following the Calavo acquisition, the expected synergy effect, and prospects for improved financial performance in the fourth quarter.

Calavo integration supports long-term prospects

Mission Produce is one of the world’s largest avocado suppliers. The company grows, sources, packs, and distributes produce, and following the acquisition of agribusiness company Calavo in May, it is also expanding into prepared foods, including guacamole and sauces.

The most important quarterly takeaway, according to Freedom Broker analysts, is the increase in the expected annual synergy benefit from the Calavo integration to more than $30 million. Previously, management had expected to achieve at least $25 million within 18 months after the deal closed.

The new estimate reflects higher savings in selling, general and administrative expenses, as well as opportunities to optimize the combined operating network. Management expects the expanded platform to enable Mission Produce to significantly increase its market share in 2027–2030.

Freedom Broker analysts believe the vertically integrated business model, diversified sourcing geography, and greater scale following the deal improve supply reliability, broaden the customer base, and strengthen the company’s operational flexibility.

At the same time, results will depend on the success of the Calavo integration, Mission Produce’s ability to translate volume growth into higher margins and cash flows, as well as the pace of deleveraging.

Revenue exceeded the analysts’ forecast

In fiscal 2026 third quarter, Mission Produce revenue increased 25.8% year over year—from $357.7 million to $450.0 million. The result was about 16.6% above Freedom Broker’s forecast of $386 million.

The main growth driver was a 38% increase in avocado sales volume due to the inclusion of Calavo’s results and expanded shipments from Mexico. Mission Produce sold about 253 million pounds of avocados. Meanwhile, the average selling price fell 9% year over year due to higher production and supply in the market.

Marketing & Distribution segment revenue rose 20.4%, from $344.1 million to $414.3 million. Prepared Foods segment sales for the period after the Calavo acquisition closed on May 28 totaled $15.5 million and do not yet reflect a full quarter’s results.

Sales to external customers increased from $9.1 million to $14.8 million. However, total segment revenue including transactions with affiliated companies declined from $49.0 million to $45.8 million due to lower average avocado prices. Blueberry revenue increased from $4.5 million to $5.4 million, supported by refunds of previously paid customs duties.

Deal-related costs resulted in a net loss

Revenue growth has not yet translated into a comparable improvement in profitability. Gross profit totaled $44.7 million versus $45.1 million a year earlier, and gross margin fell 270 basis points to 9.9%.

Lower average avocado prices pressured International Farming, while the Calavo acquisition supported Marketing & Distribution results. Operating income fell from $21.0 million to $0.5 million. The report included $12.6 million in advisory and integration expenses related to the transaction, as well as acquisition accounting-related costs. Adjusted EBITDA was $32.4 million versus $32.6 million a year earlier. In Marketing & Distribution, the metric increased from $20.0 million to $24.7 million, while in International Farming it declined from $12.1 million to $7.6 million.

Adjusted net income decreased from $18.2 million, or $0.26 per diluted share, to $15.0 million, or $0.18 per share. The net loss attributable to Mission Produce was $6.5 million, or $0.08 per diluted share, versus net income of $14.7 million, or $0.21 per share, a year earlier. The result includes $25.4 million in pre-tax expenses related to the Calavo acquisition.

The company expects EBITDA growth in the fourth quarter

Management reaffirmed its adjusted EBITDA guidance for the second half of fiscal 2026 at $84–88 million. After posting $32.4 million in the third quarter, the company expects about $52–55 million in the fourth quarter.

Support should come from Calavo’s contribution for a full quarter, later timing of Peru’s harvest shipments, increased blueberry sales, and a recovery in avocado margins. Exportable volume from plantations in Peru is expected at 120–130 million pounds versus 105 million pounds in the prior season.

Industry avocado shipments in the fourth quarter may rise about 10% year over year, while the average price, according to management’s forecast, will decline by approximately 10% from $1.39 per pound a year earlier.

Debt rose after the Calavo acquisition

At quarter-end, Mission Produce cash and cash equivalents totaled $47.1 million versus $64.8 million at the end of fiscal 2025. Long-term debt, including the current portion, increased to about $400.3 million, primarily due to debt financing of the Calavo purchase.

For the first nine months of fiscal 2026, net cash used in operating activities reached $25.9 million versus net cash provided of $21.4 million a year earlier. The change was driven by lower profit, $26.0 million in deal and integration costs, and a seasonal increase in working capital needs.

Capital expenditures declined from $39.8 million to $32.0 million. For the full year, the company expects about $45 million. Under the $100 million share repurchase program, Mission Produce bought back $7.2 million of its shares in the third quarter and $9.4 million over nine months.

Freedom Broker maintained its “Buy” rating

In June, Freedom Broker experts also recommended buying Mission Produce shares, but the price target at the time was $15. Analysts expected a recovery in the second half after a weak second quarter, when revenue fell 24% to $290.9 million and adjusted EBITDA declined from $19.1 million to $7.1 million. Following the new report, the price target was raised to $16.

This is not an individual investment recommendation.