McCormick & Co. Inc. ( MKC ) delivered first
quarter 2013 earnings of 57 cents per share, ahead of the
prior-year quarter earnings of 55 cents by 3.6%. The results were
driven by a favorable tax rate, higher income from unconsolidated
operations and a lower share count. Earnings also beat the Zacks
Consensus Estimate by a penny.
Total revenue in the quarter grew 3% year over year to $934
million, beating the Zacks Consensus Estimate of $918 million. The
sales were driven by positive volume and product mix and pricing
actions in response to high input costs, especially in the consumer
business segment. Product innovation and brand marketing
investments led to the increase in sales of the consumer business.
However, McCormick witnessed sluggish demand from quick service
restaurants in the industrial segment.
Operating income was almost flat at $112 million. Top-line
growth and cost savings from McCormick's Comprehensive Continuous
Improvement ('CCI') program were offset by higher material costs
and an increase in retirement benefit expense.
Consumer Business: Segment revenues surged 7% year over
year to $569.8 million in the reported quarter. Improved volume,
increased product mix and higher pricing. Sales grew in all three
geographic regions of Americas, Europe, Middle East and Africa
(EMEA) and Asia/Pacific, with particularly strong performance in
Like revenues, operating income of the segment also increased 8%
to $88 million in the quarter supported by increases in sales and
cost savings, which easily offset the declines from higher material
costs and retirement benefit expenses.
Industrial Business: Segment revenue declined 2% year
over year to $364.6 million in the first quarter of 2013, in line
with management expectations of weak results in the quarter.
Decline in volume and product mix, poor demand from quick service
restaurants in U.S. and China and strong year ago comparisons led
to the sales miss.. On a constant currency basis, sales declined 3%
in the segment.
Operating income of this McCormick segment declined 22.6% to
$24.0 million, primarily due to lower sales, an unfavorable mix and
the impact of increased retirement benefit expenses.
McCormick expects earnings of 60 cents, flat year over year for
the second quarter of 2013. In addition, the company expects higher
material costs, increased retirement benefit expense and increase
in its brand marketing investments to continue in the second
McCormick has re-affirmed its earnings and sales guidance for
2013. McCormick expects sales growth in the range of 3% to 5% in
local currency, driven by higher volume and product mix coupled
with minimal pricing and currency impact. The company reiterates
its operating income growth in the range of 6% to 8%.
McCormick expects earnings in the range of $3.15 to $3.23,
driven by higher sales and at least $45 million in CCI cost
savings, offset by retirement benefit expenses.
McCormick currently holds a Zacks Rank #4 (Sell). Other
specialty food companies which are better positioned and warrant a
look include Flower Foods Inc ( FLO ), Conagra
Foods Inc ( CAG ), and
General Mills Inc ( GIS ). While Flower
Foods holds a Zacks Rank #1 (Strong Buy), Conagra and General Mills
hold a Zacks Rank #2 (Buy).CONAGRA FOODS (CAG): Free Stock Analysis ReportFLOWERS FOODS (FLO): Free Stock Analysis ReportGENL MILLS (GIS): Free Stock Analysis ReportMCCORMICK & CO (MKC): Free Stock Analysis
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