Earnings Preview: McCormick - Analyst Blog

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McCormick & Company, Inc. ( MKC ) is set to report fiscal first quarter 2013 results before the opening bell on Apr 2. Last quarter, this global leader in flavors posted a 3.48% negative surprise. Let's see how things are shaping up prior to the announcement.

Factors This Past Quarter

McCormick's sales and earnings both lagged the Zacks Consensus Estimate in fourth quarter fiscal 2012 as the company experienced disappointing retailer buying patterns and temporary supply chain disruptions in the Americas region and lower demand from industrial customers in the Asia/Pacific region.

Also, the unfavorable mix of businesses negatively impacted operating income in the industrial segment in the quarter. Though earnings and revenues increased on a year-over-year basis driven by acquisitions benefits, positive volume, and improved product/ pricing mix; high input costs and currency headwinds remained an overhang in the quarter.

Earnings Whispers

The Zacks Consensus Estimate for the first quarter stands at 56 cents. Estimates have mostly seen a downward trend ahead of the first quarter results, due to an expectation of soft results from industrial segment.

Though McCormick remains on track to implement a new inventory management process in order to improve inventory levels, the difficult global economy ahead and material cost pressure is expected to hurt the sales in the coming quarters.

The stock carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method ) and a Zacks Rank of #1, #2 or #3 to beat earnings estimates. You could, however, consider other consumer staples stocks like:

  • Pilgrim's Pride Corp. ( PPC ), Earnings ESP of +138.46% and a Zacks Rank #1 (Strong Buy)
  • Flowers Foods Inc. ( FLO ), Earnings ESP of +5.13% and a Zacks Rank #1 (Strong Buy)
  • Kellogg Co. ( K ), Earnings ESP of +0.98% and a Zacks Rank #2 (Buy)

FLOWERS FOODS (FLO): Free Stock Analysis Report

KELLOGG CO (K): Free Stock Analysis Report

MCCORMICK & CO (MKC): Free Stock Analysis Report

PILGRIMS PRIDE (PPC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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