In order to further improve productivity across the
McCormick & Co. Inc.
) has introduced several initiatives in the Europe, Middle East
and Africa (EMEA) region as part of its Comprehensive Continuous
Improvement program (CCI).
Started in 2009, McCormick's CCI program has helped the
company to focus on reducing costs and enhancing productivity.
The company has used the CCI savings to increase its investments,
thereby leading to increased sales, operating income and profit.
The company's long-term annual growth objectives are to increase
sales in the range of 4% to 6%, operating income in the range of
7% to 9% and earnings per share in the range of 9% to 11%. CCI
cost savings reached $56 million in fiscal 2012, well above the
company's expectation of saving at least $40 million. In 2013,
the company expects to deliver at least $55 million of additional
McCormick has chosen the EMEA region, as it has meaningfully
contributed to the company's CCI goals. The company is thus keen
on further improving productivity in this region that would also
support long-term growth. The company has taken some initiatives
such as the closure of the company's current operations in The
Netherlands and streamlining selling, general and administrative
costs, including the centralization of shared service activity
across the region into Poland.
These initiatives will help in achieving annual cost savings
of approximately $10 million by 2015. This will contribute to the
company's long-term goal of achieving at least $45 million in
annual CCI-related cost savings.
The CCI-related charges are expected to lower fiscal 2013
reported earnings by approximately 14 cents. Management now
expects its GAAP earnings guidance for 2013 to be at the lower
end of the range of $2.89 to $2.95 per share. Excluding
CCI-related charges, the company reaffirmed its adjusted earnings
outlook at the lower end of its $3.13 to $3.19 range. McCormick
continues to expect adjusted operating income to grow 3% to 5%
for fiscal 2013.
In the recently concluded third-quarter fiscal 2013 results,
McCormick's cost savings along with top-line growth led to
operating income growth of 3%. Earnings were in line with the
Zacks Consensus Estimate and the year-ago earnings. Higher
operating income and lower share count were largely offset by a
tax rate increase in the quarter.
We note that McCormick's earnings and sales have remained
under pressure from the past few quarters due to sluggish demand
from quick service restaurants, primarily in the U.S. and Asia.
In the U.S., quick service restaurant demand was soft due to
focus on menu items not flavored by McCormick, while in Asia
demand was adversely impacted by bird flu concerns in China.
While we believe that the company's initiatives in the EMEA
region will boost cost savings and help earnings growth over the
quarters, we remain on the sidelines over the growing concerns in
the industrial business. McCormick currently holds a Zacks Rank
Other specialty food companies which are better positioned and
warrant a look include
Green Mountain Coffee Roasters, Inc
Pinnacle Foods Inc
The J.M. Smucker Co. Inc
), all of them carrying a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
MCCORMICK & CO (MKC): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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