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McCormick (MKC) Up More Than 12% in 3 Months: Here's Why
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McCormick & Company (MKC - Free Report) is well-positioned to increase its presence through acquisitions to grow its portfolio strategically. The global leader in flavor’s focus on brand marketing, new products and packaging innovation continues to drive growth. The company’s cost-saving programs position it well to support investments and drive operating margin growth.
The Zacks Rank #2 (Buy) company’s shares have increased 12.8% in the past three months compared with the industry’s growth of 4.1%. The stock has gained the Zacks Consumer Staples’s growth of 5% during this time.
Let’s delve deeper.
Key Growth Catalysts
McCormick’s commitment to achieving long-term objectives is evident from its proven track record, wide-reaching and competitive global portfolio, focus on high-growth, profitable areas, alignment with evolving consumer preferences and a distinctive heat platform. Management continues to prioritize investments in key areas and growth drivers, category management and proprietary technology. The company's effective pricing strategy keeps it well-positioned for growth. These upsides drove the company’s McCormick first-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.
Image Source: Zacks Investment Research
Strategic Expansion Efforts
McCormick is on track with prudent buyouts to fuel growth. In December 2020, the company 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. In November 2020, McCormick also completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. It believes that the buyout of Cholula accelerates its growth potential across the condiment platform and widens the product portfolio in the hot sauce category. In the fiscal first quarter, the company incurred $62 million as capital expenditures for projects to increase capacity and capabilities to meet growing demand, advance digital transformation and optimize the cost structure.
Efficiency-Driven Savings Initiatives
McCormick focuses on saving costs and enhancing productivity through its Comprehensive Continuous Improvement (“CCI”) program. The CCI program helps the company to reduce costs and improve productivity. Its fiscal first-quarter gross profit margin expanded 140 basis points (bps). The upside can be attributed to positive pricing actions, product mix and cost savings from CCI and Global Operating Effectiveness (GOE) programs.
For the fiscal 2024, management expects gross margin expansion of 50-100 bps year over year, reflecting favorable impacts from pricing, product mix and cost savings from the programs mentioned above. Such cost savings, coupled with effective pricing actions, are likely to continue enhancing the company’s profits in the future.
Road Ahead Looks Promising
All said, management is encouraged by its positive business momentum and anticipates some improvement in volume performance, which is expected to strengthen throughout the year. The company’s savings are driving growth investments and operating margin expansion. Management anticipates witnessing a favorable impact of pricing actions undertaken in the prior year.
For 2024, McCormick’s adjusted operating income is likely to grow 3-5% (up 4-6% at constant currency or cc) due to the gross margin expansion. Management envisions 2024 adjusted earnings per share (EPS) in the band of $2.80-$2.85, suggesting a 4-6% increase from the year-ago period’s tally and a 5-7% increase at cc.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal year earnings indicates growth of 7.6% from the year-ago reported figure.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1. VITL has a trailing four-quarter average earnings surprise of 102.1%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.5% and 47.5%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 24.6% from the year-ago reported numbers.
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McCormick (MKC) Up More Than 12% in 3 Months: Here's Why
McCormick & Company (MKC - Free Report) is well-positioned to increase its presence through acquisitions to grow its portfolio strategically. The global leader in flavor’s focus on brand marketing, new products and packaging innovation continues to drive growth. The company’s cost-saving programs position it well to support investments and drive operating margin growth.
The Zacks Rank #2 (Buy) company’s shares have increased 12.8% in the past three months compared with the industry’s growth of 4.1%. The stock has gained the Zacks Consumer Staples’s growth of 5% during this time.
Let’s delve deeper.
Key Growth Catalysts
McCormick’s commitment to achieving long-term objectives is evident from its proven track record, wide-reaching and competitive global portfolio, focus on high-growth, profitable areas, alignment with evolving consumer preferences and a distinctive heat platform. Management continues to prioritize investments in key areas and growth drivers, category management and proprietary technology. The company's effective pricing strategy keeps it well-positioned for growth. These upsides drove the company’s McCormick first-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.
Image Source: Zacks Investment Research
Strategic Expansion Efforts
McCormick is on track with prudent buyouts to fuel growth. In December 2020, the company 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. In November 2020, McCormick also completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. It believes that the buyout of Cholula accelerates its growth potential across the condiment platform and widens the product portfolio in the hot sauce category. In the fiscal first quarter, the company incurred $62 million as capital expenditures for projects to increase capacity and capabilities to meet growing demand, advance digital transformation and optimize the cost structure.
Efficiency-Driven Savings Initiatives
McCormick focuses on saving costs and enhancing productivity through its Comprehensive Continuous Improvement (“CCI”) program. The CCI program helps the company to reduce costs and improve productivity. Its fiscal first-quarter gross profit margin expanded 140 basis points (bps). The upside can be attributed to positive pricing actions, product mix and cost savings from CCI and Global Operating Effectiveness (GOE) programs.
For the fiscal 2024, management expects gross margin expansion of 50-100 bps year over year, reflecting favorable impacts from pricing, product mix and cost savings from the programs mentioned above. Such cost savings, coupled with effective pricing actions, are likely to continue enhancing the company’s profits in the future.
Road Ahead Looks Promising
All said, management is encouraged by its positive business momentum and anticipates some improvement in volume performance, which is expected to strengthen throughout the year. The company’s savings are driving growth investments and operating margin expansion. Management anticipates witnessing a favorable impact of pricing actions undertaken in the prior year.
For 2024, McCormick’s adjusted operating income is likely to grow 3-5% (up 4-6% at constant currency or cc) due to the gross margin expansion. Management envisions 2024 adjusted earnings per share (EPS) in the band of $2.80-$2.85, suggesting a 4-6% increase from the year-ago period’s tally and a 5-7% increase at cc.
Stocks to Consider
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2. SJM has a trailing four-quarter earnings surprise of 7.5%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal year earnings indicates growth of 7.6% from the year-ago reported figure.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1. VITL has a trailing four-quarter average earnings surprise of 102.1%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.5% and 47.5%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 24.6% from the year-ago reported numbers.