After a profit decline in the first quarter,McCormick (
) returned to growth this week as it posted its Q2 earnings.
The maker of spices and other food products lifted Q2 profit
9% to 60 cents a share, matching Wall Street's estimates and
rebounding from Q1's 4% dip.
Prior to the slip in Q1, McCormick had achieved a long streak
of quarterly EPS increases, even through the economically
difficult 2008 and 2009.
That's helped the company score three-year and five-year
Earnings Stability Factors of 2, just shy of the best-possible
grade. It's encouraging to see that kind of stability, especially
for investors counting on regular dividends.
Another plus: McCormick has a long history of raising its
dividend, which currently has an annualized yield of about 2%. It
hiked its payout again in November, the 26th year in a row for an
While McCormick's stability and dividend history are real
strengths, a weakness is its relatively modest quarterly growth
in EPS and sales, with rates below the 25% or more that you
prefer to see for a CAN SLIM stock.
Still, the company has posted five straight quarters of
double-digit percentage gains in revenue. Its Q2 report, out
before the open Wednesday, showed an 11% gain in revenue to $984
million, above forecasts.
The Sparks, Md.-based company said it got a lift in Q2 from
acquisitions and price increases it rolled out to offset higher
input costs. Analysts said they're heartened by how shoppers
responded during Q2 to the higher prices.
"The pantry deloading in response to higher consumer prices
for MKC spices and seasonings appears to have ended quickly,"
Credit Suisse analysts said in a research note.
They also wrote: "McCormick is another example of why
companies with pricing power and brands with a high degree of
consumer loyalty can navigate volatile commodity and consumer
spending environments better than their food peers."
In terms of chart action, McCormick is touching new highs
after lifting off support at its 10-week moving average. The
stock behaves relatively calmly.