McCormick & Co. Inc.
) delivered fourth quarter 2012 earnings of $1.11 per share,
ahead of the prior-year quarter earnings of 98 cents by 13.3%.
The results were driven by a favorable operating income and tax
rate and from higher income from unconsolidated operations.
Earnings, however, lagged the Zacks Consensus Estimate of $1.14
Total revenue in the quarter grew 3% year over year to $1.15
billion. Revenues, however, lagged the Zacks Consensus Estimate
of $1.17 billion. On a currency basis, revenues increased 4%,
owing to positive volume and product mix and pricing actions in
response to high input costs. McCormick's deals completed in 2011
(acquisition of Poland-based Kamis S.A. and Kitchen Basics, a
leading brand of liquid stock; and a joint venture with
India-based Kohinoor Foods Ltd.) also contributed to overall
Operating income increased 4.2% to $200 million. However, the
business mix between regions had an unfavorable impact on
operating income of the industrial segment in the fourth quarter
of 2012 versus the year-ago period.
Segment revenues surged 3% year over year to $744.1 million in
the reported quarter. On a currency basis, revenues increased 4%,
where half of the increase was driven by benefit from
acquisitions. Price actions to offset raw material costs also
contributed to the gain.
Like revenues, operating income of the segment also increased
8% to $177.2 million in the quarter supported by increases in
sales and cost savings.
Segment revenue climbed 4% year over year to $401.7 million in
the fourth quarter of 2012, attributable to increased prices in
response to high input costs, with minimal currency impact.
Operating income of this McCormick segment declined 17.6% to
$23.0 million, primarily due to unfavorable business mix and a $4
million charge related to a supplier quality issue. However, the
company expects to recover a portion of this amount in 2013.
Fiscal 2012 Results
The company posted earnings of $3.04 per share, ahead of the
prior-year quarter earnings of $2.79 by 9% and within the
company's guidance of $3.03 to $3.08 per share. The results were
driven by a favorable operating income and tax rate, offset by
lower income from unconsolidated operations and higher interest
expenses. Earnings, however, lagged the Zacks Consensus Estimate
of $3.08 by 1.3%.
Revenue increased 9% to $4.01 billion in fiscal 2012, missing
the Zacks Consensus Estimate of $4.04 billion. In local currency,
revenue increased 10%, which was within the company expected
range of 9% to 11% sales growth. Pricing gains, benefits of
acquisitions, growth in volume as well as product mix led to the
growth. Emerging markets contributed 14% of the sales increase in
fiscal 2012, higher than the contribution of 10% in the year-ago
Operating income surged 7% to $578 million in full year 2012
but was below the company's expectation of 9% to 11% growth. The
year-over-year increase was primarily driven by higher sales and
cost saving initiatives. Retirement benefit expenses as well as
the favorable impact of acquisition related transaction costs
also impacted the increase.
During 2012, the company generated cost savings of $56 million
from its Comprehensive Continuous Improvement ('CCI') program,
which exceeded the goal of achieving $40 million in cost savings.
Apart from benefiting operating income and earnings, CCI cost
savings along with pricing actions was able to offset the impact
of increased material costs. The company also increased its brand
marketing investment by $11 million in the year.
Other Financial Details
In Nov 2012, McCormick's board approved a 10% increase in
dividend, marking the 27th consecutive annual
During fiscal 2012, the company rewarded its shareholders and
returned $297 million of cash through dividends and share
Guidance for Fiscal 2013
The global leader in flavors, McCormick continues to forecast
a difficult global economic situation and volatility in material
costs. However, the company expects to grow sales, generate cost
savings, invest in brand marketing support and deliver solid
profit growth on the back of strong demand and growth
In 2013, McCormick expects solid sales growth from innovation
and brand marketing initiatives. The company expects sales
growth in the range of 3% to 5% in local currency, with minimal
pricing and currency impact. This guidance does not include any
The company expects material cost inflation to moderate to
about 3% in 2013, compared to a high single-digit increase in
2012. Operating income is expected to grow 6% to 8%.
McCormick expects earnings in the range of $3.15 to $3.23,
which reflects an underlying double-digit growth rate driven by
higher sales and at least $45 million in CCI cost savings, offset
in part by a year-on-year increase in tax rate and retirement
McCormick holds a Zacks Rank #2 (Buy). Other specialty food
companies which carry a Zacks Rank #1 (Strong Buy) are
B&G Foods Inc
Flower Foods Inc
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