Free Annual Reports
McCormick's Outlook Easy To Stomach
McCormick (NYSE:MKC) is the undisputed market leader in selling spices, seasonings and specialty flavors to consumers and food makers. Domestic growth has been steady and global expansion could really spice up growth prospects going forward. For now, the stock offers a comforting mix of modest operating growth, dividend yield and downside protection.
Third-Quarter Sales Review
Net sales eked out 0.4% growth to $795 million. Management detailed that the top line improved about 1% when stripping out the effect of currency fluctuations on international sales. Volume and product mix grew 2%.
Sales directly to consumers via grocery chains such as Kroger (NYSE:KR) and SUPERVALU (NYSE:SVU) increased 1% to account for 57.1% of quarterly sales. Americas' sales rose 4%, and a double-digit increase internationally was led by a 15% jump in China.
Industrial sales to food and beverage manufacturers, such as Kraft (NYSE:KFT) and Dr. Pepper Snapple (NYSE:DPS), were about flat from last year's third quarter and made up the rest of sales. They fell 1% in the Americas, 3% in the Europe, Middle East, and Africa (EMEA) region, but jumped 10% in the Asia/Pacific market.
Profit Trends and Outlook
Operating income grew in both business segments; consumer reported a nice 8.5% increase to $95.8 million for a profit margin of 21.1%, and industrial witnessed a 6.7% increase to $30.2 million as profit margins grew slightly to 8.9%. These figures exclude one-time charges and were attributed to a mix of higher sales, lower costs, and productivity improvements.
Total company operating income improved 8% to $126 million. Lower interest expense, income taxes, and higher other income pushed total net income up 36.3% to $102.4 million, or 76 cents per diluted share. This came in firmly ahead of analyst expectations.
Given the strong profit trends, management raised its guidance and now expects full year earnings growth between 9% and 11%, or $2.67-2.71 per share. Analysts expect modest 3.8% sales growth to $3.3 billion for the entire year. (For related reading, take a look at Can Earnings Guidance Accurately Predict The Future?)
Bottom Line
McCormick's business was largely unaffected by the credit crisis. Sales have steadily increased for the past couple of years and over the past decade. After a brief blip in 2006, profits have also grown consistently. At a forward P/E of approximately 16, the shares aren't a steal but offer a nice combination of steady annual operating growth and downside protection. A 2.5% dividend yield is also nice. The company could really spice things up by continuing to focus on overseas expansion, which could lead to double-digit growth trends if things really start picking up.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
 |
What Is Your Risk Tolerance? View Slideshow |
Net sales eked out 0.4% growth to $795 million. Management detailed that the top line improved about 1% when stripping out the effect of currency fluctuations on international sales. Volume and product mix grew 2%.
Sales directly to consumers via grocery chains such as Kroger (NYSE:KR) and SUPERVALU (NYSE:SVU) increased 1% to account for 57.1% of quarterly sales. Americas' sales rose 4%, and a double-digit increase internationally was led by a 15% jump in China.
Industrial sales to food and beverage manufacturers, such as Kraft (NYSE:KFT) and Dr. Pepper Snapple (NYSE:DPS), were about flat from last year's third quarter and made up the rest of sales. They fell 1% in the Americas, 3% in the Europe, Middle East, and Africa (EMEA) region, but jumped 10% in the Asia/Pacific market.
Operating income grew in both business segments; consumer reported a nice 8.5% increase to $95.8 million for a profit margin of 21.1%, and industrial witnessed a 6.7% increase to $30.2 million as profit margins grew slightly to 8.9%. These figures exclude one-time charges and were attributed to a mix of higher sales, lower costs, and productivity improvements.
Total company operating income improved 8% to $126 million. Lower interest expense, income taxes, and higher other income pushed total net income up 36.3% to $102.4 million, or 76 cents per diluted share. This came in firmly ahead of analyst expectations.
Given the strong profit trends, management raised its guidance and now expects full year earnings growth between 9% and 11%, or $2.67-2.71 per share. Analysts expect modest 3.8% sales growth to $3.3 billion for the entire year. (For related reading, take a look at Can Earnings Guidance Accurately Predict The Future?)
Bottom Line
McCormick's business was largely unaffected by the credit crisis. Sales have steadily increased for the past couple of years and over the past decade. After a brief blip in 2006, profits have also grown consistently. At a forward P/E of approximately 16, the shares aren't a steal but offer a nice combination of steady annual operating growth and downside protection. A 2.5% dividend yield is also nice. The company could really spice things up by continuing to focus on overseas expansion, which could lead to double-digit growth trends if things really start picking up.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Ryan C. Fuhrmann
Ryan C. Fuhrmann, CFA, has a background in portfolio management, overseeing assets for high-net-worth individuals and covering a broad array of industries from a generalist perspective. An active student of investing, he focuses on communicating his ideas as an investment writer and learning from the financial community. Ryan is also actively involved with the CFA Institute. Feel free to visit his website at www.rationalanalyst.com.
Free Annual Reports
