Shares of McCormick & Co., Inc.MKC reached a 52-week high of $85.99 on Oct 23, 2015 and eventually closed at $85.17. Shares of this global leader in flavors and spices got a boost after the company reported strong sales growth in the recently reported third quarter fiscal 2015 results.
Third Quarter Results
On Oct 1, McCormick delivered mixed third quarter results. While earnings lagged the Zacks Consensus Estimate and declined in double digits year over year; revenues smoothly exceeded the consensus mark, possibly due to strong sales momentum.
Third-quarter revenues of $1.060 billion exceeded the Zacks Consensus Estimate of $1.055 billion by 0.5% and grew about 2% from the prior-year quarter. Excluding currency headwinds, revenues grew 7%, driven by increased volume and product mix in both business segments. On a constant currency basis, adjusted operating income grew 1%, driven by sales growth and cost savings.
Moreover, based on its strong sales momentum, solid acquisitions and optimistic view on the fourth quarter, McCormick anticipates fiscal year 2015 sales to grow at the upper end of its 4% to 6% guidance range in constant currency.
The company has also increased its 2015 cost savings target to at least $95 million and also raised its planned brand marketing support guidance to a high single-digit year-on-year increase.
However, despite higher sales and increased cost savings target, the company expects 2015 adjusted earnings per share to be at the lower end of the company's previously guided range of $3.47 to $3.54 due to the current projection of operating income and the impact of the recent decline in Mexico peso on McCormick's income from unconsolidated operations.
We are optimistic on McCormick, owing to continuing rising demand for spices, herbs and seasonings. Further, its focus on building sales through brand marketing investments and acquisitions would help drive its earnings.
McCormick has a Zacks Rank #3 (Hold).
Better-ranked players in the food industry include B&G Foods, Inc. BGS , Cal-Maine Foods, Inc. CALM and Flower Foods, Inc. FLO . While B&G Foods and Cal-Maine Foods sport a Zacks Rank #1 (Strong Buy), Flower Foods holds a Zacks Rank #2 (Buy).
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