Yahoo Finance McCormick (MKC) Looks Tempting: Stock Up 15% Since Q1 Results
McCormick & Company, Incorporated MKC appears an appetizing treat, with its shares up 17.6% in the past six months, outpacing the industry’s growth of 12.8%. Shares of this manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors have increased almost 15% since the company released robust first-quarter fiscal 2023 results on Mar 28.
McCormick has been benefiting from its Global Operating Effectiveness (“GOE”) and the Comprehensive Continuous Improvement (“CCI”) programs amid cost and supply-chain hurdles. While management expects mid-teens cost inflation in 2023, it expects to fully counter inflation through its pricing and other actions.
Let’s delve deeper into first-quarter results and guidance alongside noting the key drivers of this Zacks Rank #2 (Buy) company.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote
Impressive Q1 & FY23 View
First-quarter fiscal 2023 results reflected solid demand and early results from MKC’s moves to improve profit realization. First-quarter sales of $1,565.5 million moved up 3% year over year. Constant-currency (cc) sales increased 5% on 11% growth from pricing actions.
Sales reflected the strength of McCormick’s vast global portfolio and the effective execution of its strategies. The company benefited from the solid underlying business performance, which was somewhat offset by the Kitchen Basics divestiture, reduced consumption in China due to the pandemic and the exit of the Consumer business in Russia.
The company’s GOE Program is yielding favorable results, with first-quarter savings in tandem with management’s expectations. The global demand for flavor continues to serve as the basis of the company’s sales growth. Management remains focused on capitalizing on long-term consumer trends, higher digital usage, trusted brands, healthy and flavorful cooking and purpose-inclined practices.
McCormick anticipates fiscal 2023 to witness a solid underlying business performance backed by sales growth. It expects the GOE Program and the lapping of pandemic-led hurdles to have positively impacted the fiscal 2023 operating income, which is likely to be somewhat negated by the impacts of the Kitchen Basics divestiture and a rise in employee incentive compensation costs.
For fiscal 2023, net sales are expected to increase 5-7% from the fiscal 2022 levels. Management expects sales growth to be fueled by pricing actions, which, along with cost savings, are likely to help it counter inflationary headwinds. The company anticipates seeing solid growth via brand strength, brand marketing, new products, category management and differentiated customer engagement.
The adjusted operating income is likely to increase 9-11%. Management expects adjusted earnings in the band of $2.56-$2.61 per share in fiscal 2023, suggesting 1-3% growth. The bottom line is likely to be fueled by a solid operating performance, partly offset by increased interest expenses and a higher projected adjusted effective tax rate. The company envisions its 2023 adjusted gross margin to expand between 25 to 75 basis points year over year. The adjusted gross margin expansion reflects a positive impact of pricing and cost savings from the CCI-led and GOE programs.
CCI & GOE Programs – Key Drivers
McCormick’s CCI program has been helping the company reduce costs and enhance productivity. Although the company’s first-quarter fiscal 2023 adjusted gross profit margin contracted year over year, cost savings from the CCI and GOE programs and favorable pricing offered some respite. Such cost savings, coupled with effective pricing actions, are likely to continue enhancing the company’s profits in the future.
In addition, the company is on track with normalizing its supply-chain costs and increasing efficiencies while strengthening the ability to service customers. Management is also undertaking streamlining actions in its entire organization.
McCormick expects its GOE program to scale up as fiscal 2023 progresses. The company is on track to generate cost savings of $75 million in 2023 through its actions to normalize supply-chain costs and streamline its organization. These upsides are likely to help McCormick keep its growth story going.
Other Solid Consumer Staple Picks
Some other top-ranked consumer staple stocks are Post Holdings POST, General Mills GIS and Beyond Meat BYND.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5.7% and 6.9%, respectively, from the corresponding year-ago reported figures.
Beyond Meat, which develops, manufactures, markets and sells plant-based meat products, currently carries a Zacks Rank #2. BYND has a trailing four-quarter negative earnings surprise of 29.3%, on average.
The Zacks Consensus Estimate for Beyond Meat’s current fiscal-year earnings suggests an increase of 39.7% from the year-ago reported number.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
General Mills, Inc. (GIS) : Free Stock Analysis Report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Post Holdings, Inc. (POST) : Free Stock Analysis Report
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
