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McCormick (MKC) Stock Up More Than 25% in 6 Months: Here's Why
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McCormick & Company, Incorporated (MKC - Free Report) looks poised, courtesy of strategic acquisitions and consumer-friendly innovations. The global leader in flavor is undertaking effective cost-saving plans amid an inflationary environment. The company capitalizes on healthy and flavorful cooking and increased digital engagement. The robust recovery in the away-from-home demand bodes well. These factors drove first-quarter fiscal 2022 top line, which rose year over year and beat the Zacks Consensus Estimate.
For fiscal 2022, McCormick expects to achieve sales growth of 3-5% (up 4-6% at constant currency or cc) year over year. Management anticipates sales to be led by new products, brand marketing, category management and differentiated customer engagement. The company’s pricing actions and cost savings are likely to offset projected inflationary pressures. Adjusted earnings per share are expected to be $3.17-$3.22, up from $3.05 reported in fiscal 2021. The earnings growth reflects solid operating growth.
McCormick strategically increased its presence through acquisitions to grow its portfolio. In Dec 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. During the first quarter of fiscal 2022, sales from FONA contributed 1% to the company’s top line. In November 2020, McCormick also completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. McCormick believes that the buyout of Cholula accelerates its growth potential across the condiment platform and widens the product portfolio in the hot sauce category.
Several other companies in the food space are benefiting from acquisitions, including Post Holdings, Inc. (POST - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Hormel Foods Corporation (HRL - Free Report) . During the first quarter of fiscal 2022, Post Holdings’ top line included $97.8 million in net sales from acquisitions. This consists of the Private label ready-to-eat (PL RTE) cereal business, Egg Beaters liquid egg brand, Almark Foods business and related assets and the Peter Pan nut butter brand. On Feb 1, 2021, POST acquired Almark Foods, renowned for its hard-cooked and deviled egg products and provides conventional, organic and cage-free products. On Jan 25, Post Holdings acquired the Peter Pan peanut butter brand.
Kraft Heinz recently acquired a majority stake in a Brazil-based condiments and sauces company — Companhia Hemmer Indústria e Comércio ("Hemmer"). The buyout will widen Kraft Heinz's International Taste Elevation platform and enhance its presence across emerging markets. In January 2022, KHC acquired an 85% stake in Germany-based Just Spices GmbH (“Just Spices”). The buyout enhances its direct-to-consumer operations and go-to-market expansion.
On Jun 7, 2021, Hormel Foods acquired Planters snacking portfolio from Kraft Heinz. In its last earnings call, HRL highlighted that Planters continues to perform at the high end of its expectations. Hormel Foods acquired a Texas-based pit-smoked meats company, Sadler's Smokehouse, in March 2020. The buyout is in sync with its initiatives to strengthen its foodservice space position.
Innovations Hold Promise
McCormick regularly enhances products through innovation to remain competitive and tap the evolving demand for new flavors, spices and herbs. Aided by a sturdy brand image, McCormick enjoys strong retail acceptance for its new products. Additionally, the company is on track to augment robust marketing support for its products. New product launches are an important part of the company’s growth. The company is optimistic about its robust pipeline of innovation in 2022. Management is leveraging its broad technology platform to develop clean label, organic and better-for-you solutions amid rising consumer’s health consciousness.
Cost-Savings Boosts Growth
McCormick focuses on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program. The CCI program helped the company to reduce costs and enhance productivity. Although the company’s first-quarter fiscal 2022 gross profit margin contracted year over year, cost savings from the program and favorable pricing offered some respite. Management expects to achieve CCI-led cost savings of nearly $85 million in 2022.
Certainly, such cost savings coupled with the aforementioned upsides are likely to continue enhancing McCormick’s growth in the future.
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McCormick (MKC) Stock Up More Than 25% in 6 Months: Here's Why
McCormick & Company, Incorporated (MKC - Free Report) looks poised, courtesy of strategic acquisitions and consumer-friendly innovations. The global leader in flavor is undertaking effective cost-saving plans amid an inflationary environment. The company capitalizes on healthy and flavorful cooking and increased digital engagement. The robust recovery in the away-from-home demand bodes well. These factors drove first-quarter fiscal 2022 top line, which rose year over year and beat the Zacks Consensus Estimate.
For fiscal 2022, McCormick expects to achieve sales growth of 3-5% (up 4-6% at constant currency or cc) year over year. Management anticipates sales to be led by new products, brand marketing, category management and differentiated customer engagement. The company’s pricing actions and cost savings are likely to offset projected inflationary pressures. Adjusted earnings per share are expected to be $3.17-$3.22, up from $3.05 reported in fiscal 2021. The earnings growth reflects solid operating growth.
The Zacks Rank #2 (Buy) stock has increased 26.4% in the past six months compared with the industry’s 5.5% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Acquisitions: Key Driver
McCormick strategically increased its presence through acquisitions to grow its portfolio. In Dec 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. During the first quarter of fiscal 2022, sales from FONA contributed 1% to the company’s top line. In November 2020, McCormick also completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. McCormick believes that the buyout of Cholula accelerates its growth potential across the condiment platform and widens the product portfolio in the hot sauce category.
Several other companies in the food space are benefiting from acquisitions, including Post Holdings, Inc. (POST - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Hormel Foods Corporation (HRL - Free Report) . During the first quarter of fiscal 2022, Post Holdings’ top line included $97.8 million in net sales from acquisitions. This consists of the Private label ready-to-eat (PL RTE) cereal business, Egg Beaters liquid egg brand, Almark Foods business and related assets and the Peter Pan nut butter brand. On Feb 1, 2021, POST acquired Almark Foods, renowned for its hard-cooked and deviled egg products and provides conventional, organic and cage-free products. On Jan 25, Post Holdings acquired the Peter Pan peanut butter brand.
Kraft Heinz recently acquired a majority stake in a Brazil-based condiments and sauces company — Companhia Hemmer Indústria e Comércio ("Hemmer"). The buyout will widen Kraft Heinz's International Taste Elevation platform and enhance its presence across emerging markets. In January 2022, KHC acquired an 85% stake in Germany-based Just Spices GmbH (“Just Spices”). The buyout enhances its direct-to-consumer operations and go-to-market expansion.
On Jun 7, 2021, Hormel Foods acquired Planters snacking portfolio from Kraft Heinz. In its last earnings call, HRL highlighted that Planters continues to perform at the high end of its expectations. Hormel Foods acquired a Texas-based pit-smoked meats company, Sadler's Smokehouse, in March 2020. The buyout is in sync with its initiatives to strengthen its foodservice space position.
Innovations Hold Promise
McCormick regularly enhances products through innovation to remain competitive and tap the evolving demand for new flavors, spices and herbs. Aided by a sturdy brand image, McCormick enjoys strong retail acceptance for its new products. Additionally, the company is on track to augment robust marketing support for its products. New product launches are an important part of the company’s growth. The company is optimistic about its robust pipeline of innovation in 2022. Management is leveraging its broad technology platform to develop clean label, organic and better-for-you solutions amid rising consumer’s health consciousness.
Cost-Savings Boosts Growth
McCormick focuses on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program. The CCI program helped the company to reduce costs and enhance productivity. Although the company’s first-quarter fiscal 2022 gross profit margin contracted year over year, cost savings from the program and favorable pricing offered some respite. Management expects to achieve CCI-led cost savings of nearly $85 million in 2022.
Certainly, such cost savings coupled with the aforementioned upsides are likely to continue enhancing McCormick’s growth in the future.