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All You Need to Note Before McCormick's (MKC) Q3 Earnings

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McCormick & Company, Incorporated (MKC - Free Report) is likely to register an increase in the top and bottom lines when it reports third-quarter fiscal 2020 numbers on Sep 29, before market open. The Zacks Consensus Estimate went down by a penny over the past 30 days to $1.51 per share, though it suggests a 3.4% increase from the figure reported in the prior-year period. Notably, McCormick delivered an earnings surprise of 26.7% in the last reported quarter. Also, this spices, seasonings, specialty foods and flavors provider has a trailing four-quarter earnings surprise of 10.9%, on average.

The Zacks Consensus Estimate for revenues is pegged at $1,390 million, indicating a rise of 4.6% from the prior-year quarter’s reported figure.

Key Factors to Note

McCormick’s Consumer Business segment sales have been benefiting from higher demand stemming from at-home consumption and cooking more at home amid the coronavirus outbreak. In the last earnings call, the company stated that it anticipates an overall increase in consumer demand in this segment during periods of elevated at-home cooking. However, the company’s Flavor Solution segment has been under pressure due to sales declines to branded foodservice consumers as well as quick-service restaurant customers amid the pandemic-led social distancing practices.

The consensus mark for Consumer Business segment sales for the third quarter stands at $905 million compared with $794 million in the year-ago period. For the Flavor Solutions segment, the consensus mark for sales is pegged at $488 million, suggesting an 8.8% decline from $535 million reported in the same period last year.    

Nevertheless, McCormick on the whole has been gaining from its brand strength, courtesy of its focus on innovation, buyouts and efficient marketing strategy. Incidentally, new and renovated products contributed favorably to the company’s performance in the last reported quarter. Further, it re-launched its Old Bay hot sauce in June. These trends bode well for the quarter under review. Apart from this, we commend McCormick’s focus on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement program, which has been yielding results.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for McCormick this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

McCormick currently has a Zacks Rank #3 and an Earnings ESP of -3.57%.

Stocks With Favorable Combinations

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 this season.

Newell Brands (NWL - Free Report) has an Earnings ESP of +37.16% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kimberly-Clark (KMB - Free Report) has an Earnings ESP of +2.65% and a Zacks Rank #2.

Philip Morris (PM - Free Report) has an Earnings ESP of +2.41% and a Zacks Rank #3.

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