McCormick & Company, IncorporatedMKC is slated to report third-quarter fiscal 2017 results on Sep 28, before the opening bell. The company's earnings have outpaced the Zacks Consensus Estimates in 13 out of the last 15 quarters, with an average beat of 4.4% in the trailing four quarters.
Let's look into some factors that are likely to impact the third-quarter results.
The current Zacks Consensus Estimate for the quarter under review has remained unchanged over the last 30 days at $1.05, reflecting a year-on-year increase of 1.7%. However, estimates for fiscal 2017 have increased by a cent to reach $4.09, reflecting growth of 8.3% from the prior-year period.
Further, analyst polled by Zacks expects revenues of $1.15 billion for the third quarter, up 5% from the prior-year period. Revenues for fiscal 2017 are expected to be $4.8 billion, displaying an increase rise of 7.9% from the previous year.
What Does the Zacks Model Unveil?
Our proven model does not conclusively show that McCormick is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
McCormick has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.05. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
Factors at Play
McCormick's strategic focus on acquisitions has been aiding the company to boost top line for quite a while now. It recently completed the acquisition of the food division of Reckitt Benckiser Group plc. The acquisition is anticipated to generate cost synergies of approximately $50 million, expected to be achieved by 2020, with significant margin and earnings accretion in 2017. Moreover, the buyout is expected to position McCormick as one of the leading companies in the U.S. condiments category. In the past, the company has made several acquisitions including Italy-based Enrico Giotti SpA and Australia-based Botanical Food Company (both carried out in 2016).
Additionally, the company has been focusing on innovation and brand marketing to enhance portfolio and revenue opportunities. McCormick has also remained dedicated toward its Comprehensive Continuous Improvement ("CCI") program, which aids cost reduction. Cost savings through CCI and streamlining actions reached $109 million in 2016, up from $98 million in 2015. Further, it expects to deliver cost savings of at least $100 million in fiscal 2017 and savings of around $400 million by Nov 30, 2019.
Nevertheless, McCormick has been battling with increased input costs since the past many quarters. Prices of raw materials such as vanilla, garlic, cinnamon, oregano and rice, as well as packaging costs have been steadily increasing, thereby affecting margins. For fiscal 2017, the company expects material cost inflation in mid-single digits. Further, the company's sales in Europe, Middle East and Africa (EMEA) have remained sluggish of late due to difficult economic, political and competitive factors. Moreover, its business in the U.K. has been sluggish as large retailers reduce shelf space for food products to gain space for general merchandise.
Stocks with Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Constellation Brands STZ has an Earnings ESP of +0.99% and carries a Zacks Rank #2.You can see the complete list of today's Zacks #1 Rank stocks here .
Kellogg Company K has an Earnings ESP of +0.45 and carries a Zacks Rank #3
Church & Dwight Company Inc CHD has an Earnings ESP of +1.26% and carries a Zacks Rank #3.
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