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Can McCormick's CCI Savings Maintain EPS Momentum in 2025?
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Key Takeaways
McCormick targets 4%-6% adjusted EPS growth in fiscal 2025, driven by cost savings and higher volumes.
CCI initiatives cut SG&A costs and lifted adjusted operating income by 2% in the third quarter.
Gross margin fell 120 bps amid high input costs, but management expects a recovery in the fourth quarter.
McCormick & Company Inc. (MKC - Free Report) is banking on savings from the Comprehensive Continuous Improvement (CCI) program to be a major driver of earnings per share (EPS) growth in fiscal 2025, as highlighted in its third-quarter earnings call. The company’s focus is on improving sourcing, boosting supply chain productivity and enhancing operational efficiency.
These steps are intended to help combat inflation and rising commodity and tariff costs. Despite these cost challenges, McCormick managed to grow its operating profit in the last reported quarter, thanks to careful cost management and ongoing CCI initiatives.
Adjusted operating income rose 2% in the third quarter, largely due to lower selling, general, and administrative (SG&A) costs stemming from CCI efforts. However, this was somewhat offset by increased spending on brand marketing and technology, aimed at driving volume growth and strengthening the brand over the long term.
In the third quarter, the gross margin took a hit, dropping 120 basis points year over year, mainly due to high commodity costs and tariff issues. Some of this pressure was eased by the savings from the CCI program and greater investments in production capacity for future growth. Management expects gross margins to improve in the fourth quarter as it rolls out additional mitigation measures.
For fiscal 2025, McCormick projects adjusted EPS growth of 4% to 6% on a constant-currency basis, fueled by continued volume gains and sustained cost-saving initiatives. Management remains cautiously optimistic about navigating ongoing commodity and tariff challenges through a combination of CCI-led productivity improvements and selective pricing actions, maintaining a balance between volume growth and profitability.
The Zacks Rundown for MKC
MKC, which currently carries a Zacks Rank #4 (Sell), has seen its shares plunge 14.7% year to date compared with the industry’s decline of 14.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, MKC trades at a forward price-to-earnings ratio of 20.23X, higher than the industry’s average 14.56X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MKC’s fiscal 2025 and 2026 earnings implies a year-over-year rise of 2.4% and 6.9%, respectively.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
United Natural Foods, Inc. (UNFI - Free Report) distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 2.5% and 167.6%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally. It sports a Zacks Rank #1 at present. Lamb Weston delivered a trailing four-quarter earnings surprise of 16%, on average.
The Zacks Consensus Estimate for Lamb Weston's current fiscal-year sales indicates growth of 1.3% from the prior-year levels.
Vital Farms (VITL - Free Report) packages, markets and distributes shell eggs, butter and other products in the United States. It carries a Zacks Rank #2 (Buy) at present. Vital Farms delivered a trailing four-quarter earnings surprise of 35.8%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales and earnings implies an increase of 27.2% and 16.1%, respectively, from the prior-year levels.
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Can McCormick's CCI Savings Maintain EPS Momentum in 2025?
Key Takeaways
McCormick & Company Inc. (MKC - Free Report) is banking on savings from the Comprehensive Continuous Improvement (CCI) program to be a major driver of earnings per share (EPS) growth in fiscal 2025, as highlighted in its third-quarter earnings call. The company’s focus is on improving sourcing, boosting supply chain productivity and enhancing operational efficiency.
These steps are intended to help combat inflation and rising commodity and tariff costs. Despite these cost challenges, McCormick managed to grow its operating profit in the last reported quarter, thanks to careful cost management and ongoing CCI initiatives.
Adjusted operating income rose 2% in the third quarter, largely due to lower selling, general, and administrative (SG&A) costs stemming from CCI efforts. However, this was somewhat offset by increased spending on brand marketing and technology, aimed at driving volume growth and strengthening the brand over the long term.
In the third quarter, the gross margin took a hit, dropping 120 basis points year over year, mainly due to high commodity costs and tariff issues. Some of this pressure was eased by the savings from the CCI program and greater investments in production capacity for future growth. Management expects gross margins to improve in the fourth quarter as it rolls out additional mitigation measures.
For fiscal 2025, McCormick projects adjusted EPS growth of 4% to 6% on a constant-currency basis, fueled by continued volume gains and sustained cost-saving initiatives. Management remains cautiously optimistic about navigating ongoing commodity and tariff challenges through a combination of CCI-led productivity improvements and selective pricing actions, maintaining a balance between volume growth and profitability.
The Zacks Rundown for MKC
MKC, which currently carries a Zacks Rank #4 (Sell), has seen its shares plunge 14.7% year to date compared with the industry’s decline of 14.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, MKC trades at a forward price-to-earnings ratio of 20.23X, higher than the industry’s average 14.56X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MKC’s fiscal 2025 and 2026 earnings implies a year-over-year rise of 2.4% and 6.9%, respectively.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
United Natural Foods, Inc. (UNFI - Free Report) distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 2.5% and 167.6%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally. It sports a Zacks Rank #1 at present. Lamb Weston delivered a trailing four-quarter earnings surprise of 16%, on average.
The Zacks Consensus Estimate for Lamb Weston's current fiscal-year sales indicates growth of 1.3% from the prior-year levels.
Vital Farms (VITL - Free Report) packages, markets and distributes shell eggs, butter and other products in the United States. It carries a Zacks Rank #2 (Buy) at present. Vital Farms delivered a trailing four-quarter earnings surprise of 35.8%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales and earnings implies an increase of 27.2% and 16.1%, respectively, from the prior-year levels.