We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
McCormick & Company, Incorporated (MKC - Free Report) reported decent third-quarter fiscal 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Earnings declined year over year while net sales increased. Management reaffirmed its fiscal 2022 guidance.
The company’s sales performance reflects the strength of its broad global portfolio and the effective execution of its strategies despite a volatile operating environment. Its brand marketing investments, innovation and category management initiatives continue to drive growth. The company is on track to capitalize on a sustained shift to cooking more at home, higher digital engagement, clean and flavorful eating and trusted brands.
During the third quarter, McCormick continued to battle supply chain-related hurdles. It incurred escalated costs to meet the high demand in some parts of the business. The company is on track to managing inventory levels and eliminating inefficiencies in the supply chain.
Quarter in Detail
Adjusted earnings of 69 cents per share declined from 80 cents in the year-ago quarter. The downside stemmed from reduced adjusted operating income. The metric surpassed the Zacks Consensus Estimate of 65 cents per share.
This global leader in flavor generated sales of $1,595.6 million, up 3% year over year. Constant currency (cc) sales increased 6%, on 10% growth from pricing actions somewhat offset by a 1% decline from the Kitchen Basics divestiture, a 1% drop from the exits of a low-margin business across India and the Consumer business in Russia as well as a 2% decline from all other volume and product mix. The top line surpassed the Zacks Consensus Estimate of $1,590.4 million.
During the third quarter, cc sales increased at a three-year compounded annual growth rate (CAGR) of 7%, relative to a pre-pandemic baseline of 2019.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
The company’s gross profit margin contracted 320 basis points to 35.5%, thanks to escalated cost inflation and other supply chain expenses. These were somewhat countered by cost savings from the Comprehensive Continuous Improvement (CCI) program and pricing actions.
Operating income was $235 million, down from $265 million reported in the year-ago quarter. The downside was caused by gross margin contraction mainly in the Flavor Solutions unit.
Segment Details
Consumer: Sales went up 1% to $927.9 million and cc sales increased 4%, including a 1% unfavorable impact from the Kitchen Basics divestiture. The upside can be attributed to growth in the Americas and Asia/Pacific regions with pricing actions fueling sales across all three regions. Consumer sales in the Americas increased by 3%. Consumer sales in Europe, the Middle East and Africa (EMEA) fell by 13%. Consumer sales in the Asia/Pacific market increased 5%.
Flavor Solutions: Sales in the segment increased 6% to $667.7 million. On a constant currency basis, sales grew 10%, with growth across all three regions on solid pricing actions. Flavor Solutions sales in the Americas grew 9%. Flavor Solutions sales in EMEA fell by 1%. Flavor Solutions sales in the Asia/Pacific market increased 5%.
Financial Update
McCormick exited the quarter with cash and cash equivalents of $343.9 million, long-term debt of $3,904.8 million and total shareholders’ equity of $4,606.7 million. For the nine months ended Aug 31, 2022, net cash provided by operating activities amounted to $250.1 million.
Image Source: Zacks Investment Research
Fiscal 2022 Outlook
Management anticipates currency headwinds to hurt fiscal 2022 net sales by 3%. Adjusted operating income and adjusted earnings per share (EPS) are likely to bear a 2% negative impact from currency movements. For fiscal 2022, net sales are expected to increase 2% from fiscal 2021 levels and rise 3-5% at cc. This includes an adverse impact from the sale of the company’s Kitchen Basics business. Management expects sales growth to be fueled by pricing actions along with cost savings. These factors are likely to offset inflationary pressures over time. The company anticipates seeing solid growth via brand strength, brand marketing, new products, category management and differentiated customer engagement.
Adjusted operating income is likely to decline 13-11% (down 11-9% at cc). Management envisions adjusted earnings per share (EPS) of $2.63-$2.68 in fiscal 2022. The company posted adjusted earnings of $3.05 per share in fiscal 2021. The guidance reflects an adverse impact of 2 cents from the sale of the Kitchen Basics business.
The Zacks Rank #5 (Strong Sell) company’s shares have dropped 11.8% in the past three months compared with the industry’s decline of 4.8%.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
McCormick (MKC) Q3 Earnings Beat Estimates, Sales Increase Y/Y
McCormick & Company, Incorporated (MKC - Free Report) reported decent third-quarter fiscal 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Earnings declined year over year while net sales increased. Management reaffirmed its fiscal 2022 guidance.
The company’s sales performance reflects the strength of its broad global portfolio and the effective execution of its strategies despite a volatile operating environment. Its brand marketing investments, innovation and category management initiatives continue to drive growth. The company is on track to capitalize on a sustained shift to cooking more at home, higher digital engagement, clean and flavorful eating and trusted brands.
During the third quarter, McCormick continued to battle supply chain-related hurdles. It incurred escalated costs to meet the high demand in some parts of the business. The company is on track to managing inventory levels and eliminating inefficiencies in the supply chain.
Quarter in Detail
Adjusted earnings of 69 cents per share declined from 80 cents in the year-ago quarter. The downside stemmed from reduced adjusted operating income. The metric surpassed the Zacks Consensus Estimate of 65 cents per share.
This global leader in flavor generated sales of $1,595.6 million, up 3% year over year. Constant currency (cc) sales increased 6%, on 10% growth from pricing actions somewhat offset by a 1% decline from the Kitchen Basics divestiture, a 1% drop from the exits of a low-margin business across India and the Consumer business in Russia as well as a 2% decline from all other volume and product mix. The top line surpassed the Zacks Consensus Estimate of $1,590.4 million.
During the third quarter, cc sales increased at a three-year compounded annual growth rate (CAGR) of 7%, relative to a pre-pandemic baseline of 2019.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote
The company’s gross profit margin contracted 320 basis points to 35.5%, thanks to escalated cost inflation and other supply chain expenses. These were somewhat countered by cost savings from the Comprehensive Continuous Improvement (CCI) program and pricing actions.
Operating income was $235 million, down from $265 million reported in the year-ago quarter. The downside was caused by gross margin contraction mainly in the Flavor Solutions unit.
Segment Details
Consumer: Sales went up 1% to $927.9 million and cc sales increased 4%, including a 1% unfavorable impact from the Kitchen Basics divestiture. The upside can be attributed to growth in the Americas and Asia/Pacific regions with pricing actions fueling sales across all three regions. Consumer sales in the Americas increased by 3%. Consumer sales in Europe, the Middle East and Africa (EMEA) fell by 13%. Consumer sales in the Asia/Pacific market increased 5%.
Flavor Solutions: Sales in the segment increased 6% to $667.7 million. On a constant currency basis, sales grew 10%, with growth across all three regions on solid pricing actions. Flavor Solutions sales in the Americas grew 9%. Flavor Solutions sales in EMEA fell by 1%. Flavor Solutions sales in the Asia/Pacific market increased 5%.
Financial Update
McCormick exited the quarter with cash and cash equivalents of $343.9 million, long-term debt of $3,904.8 million and total shareholders’ equity of $4,606.7 million. For the nine months ended Aug 31, 2022, net cash provided by operating activities amounted to $250.1 million.
Image Source: Zacks Investment Research
Fiscal 2022 Outlook
Management anticipates currency headwinds to hurt fiscal 2022 net sales by 3%. Adjusted operating income and adjusted earnings per share (EPS) are likely to bear a 2% negative impact from currency movements.
For fiscal 2022, net sales are expected to increase 2% from fiscal 2021 levels and rise 3-5% at cc. This includes an adverse impact from the sale of the company’s Kitchen Basics business. Management expects sales growth to be fueled by pricing actions along with cost savings. These factors are likely to offset inflationary pressures over time. The company anticipates seeing solid growth via brand strength, brand marketing, new products, category management and differentiated customer engagement.
Adjusted operating income is likely to decline 13-11% (down 11-9% at cc). Management envisions adjusted earnings per share (EPS) of $2.63-$2.68 in fiscal 2022. The company posted adjusted earnings of $3.05 per share in fiscal 2021. The guidance reflects an adverse impact of 2 cents from the sale of the Kitchen Basics business.
The Zacks Rank #5 (Strong Sell) company’s shares have dropped 11.8% in the past three months compared with the industry’s decline of 4.8%.
Some Stocks to Consider
Some top-ranked stocks are Lancaster Colony (LANC - Free Report) , Hershey (HSY - Free Report) and The J. M. Smucker (SJM - Free Report) .
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.