Mission Produce, Inc. Just Missed EPS By 11%: Here's What Analysts Think Will Happen Next

The analysts might have been a bit too bullish on Mission Produce, Inc. (NASDAQ:AVO), given that the company fell short of expectations when it released its full-year results last week. Mission Produce missed earnings this time around, with US$892m revenue coming in 3.1% below what the analysts had modelled. Statutory earnings per share (EPS) of US$0.63 also fell short of expectations by 11%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Mission Produce

Taking into account the latest results, the current consensus from Mission Produce's five analysts is for revenues of US$1.04b in 2022, which would reflect a decent 17% increase on its sales over the past 12 months. Per-share earnings are expected to surge 43% to US$0.91. In the lead-up to this report, the analysts had been modelling revenues of US$1.03b and earnings per share (EPS) of US$0.93 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

The average price target fell 8.8% to US$20.80, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Mission Produce, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$20.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Mission Produce's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 17% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 0.8% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 3.1% annually. Not only are Mission Produce's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Mission Produce. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Mission Produce's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Mission Produce. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Mission Produce analysts - going out to 2023, and you can see them free on our platform here.

You still need to take note of risks, for example - Mission Produce has 2 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.