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McCormick's (MKC) Q4 Earnings Lag Estimates, Sales Up Y/Y
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McCormick & Company, Incorporated (MKC - Free Report) posted fourth-quarter fiscal 2018 results, wherein earnings and sales missed the Zacks Consensus Estimate. Performance during the period was weighed by adverse impacts of product mix, unfavorable currency as well as trade inventory reductions across retailers in the Americas.
Nevertheless, the top and the bottom line improved year over year. Results benefited from pricing actions, new product offerings and strength in the company’s base business. Further, management stated that it is on track with growth-oriented plans like the Comprehensive Continuous Improvement (CCI) program. Additionally, it also provided a positive view for fiscal 2019.
We note that robust growth initiatives are aiding this Zacks Rank #2 (Buy) stock. Evidently, shares of the company have gained almost 19.1% in the past six months, against the industry’s decline of 8%.
Coming back to results, adjusted earnings of $1.67 per share improved 8.4% on a year-over-year basis. Adjusted earnings were driven by favorable impacts of adjusted income tax rate, owing to reduced U.S. federal tax rate and discrete items. However, foreign currency rates had an unfavorable impact on the bottom-line performance. Further, we note that bottom-line missed the consensus mark of $1.70.
Revenues & Profits
In the quarter under review, McCormick, the global leader in flavors and spices, generated sales of $ 1,499.2 million. The top line inched up 0.6% from the prior-year quarter’s figure, including a 1% negative impact from currency. Despite the adverse impacts of trade inventory reductions in the Americas, sales gained from new products, advancement in the base business, augmented distribution and pricing actions. Further, the company’s consumer and flavor solutions units continued to be sturdy. On a constant-currency (cc) basis, the top line improved 2%. However, reported sales fell short of the Zacks Consensus Estimate of $1,550 million.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
Gross profits in the fourth quarter rose nearly 2% to $681.5 million. Gross margin came at 45.5%, expanding 70 basis points (bps) from the prior-year quarter’s figure. However, on an adjusted basis, gross margin declined 30 bps, thanks to unfavorable impacts of product mix and partially countered by savings from the CCI program
Adjusted operating income declined almost 3.2% to $297.7 million due to unfavorable product mix, higher investments and increased distribution expenses. The decline includes a 1% adverse impact from currency. Further, adjusted operating income margin came in at 19.9%, depicting contraction of 70 bps.
Segment Details
Consumer Business: Sales inched up almost 0.6% to $984.4 million. At cc, sales improved 2% on improvements across all regions.
Sales in the Americas were flat, while it rose 1% on cc basis. This was mainly driven by pricing actions, volume growth from new products, augmented marketing and distribution support. Sales in the Asia/Pacific region grew 4%, while it improved 10% on cc basis driven by broad based volume improvements in China. In the EMEA region, sales remained flat, while it rose 3% in cc owing to broad based volume and productivity improvements.
Flavor Solutions: Sales in the segment rose 0.4% from the prior-year quarter’s tally to $514.8 million. At cc, sales increased 3% on improved performance in all regions.
Sales in the Americas grew 1% (up 2% at cc) driven by improved sales to quick service restaurants and increased sales of flavors and seasonings. Sales in the EMEA region decreased 2%, while it improved 5% at cc driven by pricing and favorable impacts from a major customer’s sales. Sales in the Asia/Pacific region declined 1%, while it rose 3% at cc owing to quick service restaurants sales.
Financial Update
McCormick exited the quarter with cash and cash equivalents of $96.6 million, long-term debt of $4,052.9 million and shareholders’ equity of $3,182.2 million.
For fiscal 2018, net cash provided by operating activities were $821.2 million, up 0.7% from $815.3 million in the prior-year quarter. The rise stemmed from net income growth.
Fiscal 2019 Guidance
Management expects continued rise in global demand for flavors and fresh food offerings. With strong growth strategies in place, the company expects to successfully meet consumers rising demand. Toward this end, the company is striving to utilize resources more efficiently as well as reduce costs to drive savings.
That said, management provided projections for fiscal 2019. The company expects sales to grow in the range of 1-3% (up 3-5% at cc). The company expects to achieve top-line growth completely on an organic basis, as it anticipates no benefits from acquisitions. That said, sales are likely to be driven by efforts like new product launches and expanded distribution and marketing. Further the company intends to achieve cost savings of almost $110 million in fiscal 2019, which will be utilized for growth-oriented investments and for offsetting high costs.
Adjusted earnings for fiscal 2019 are projected in the range of $5.17-$5.27, reflecting year-on-year rise of 4-6%. The bottom line is expected to grow 6-8% at cc. Also, the company anticipates strong cash flow for 2019.
Further, the company expects adverse currency impacts of nearly 2 percentage points on net sales, adjusted operating income as well as adjusted earnings per share.
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The Estee Lauder Companies Inc (EL - Free Report) has long-term EPS growth rate of 12.1% and a Zacks Rank #2.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 12%.
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It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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McCormick's (MKC) Q4 Earnings Lag Estimates, Sales Up Y/Y
McCormick & Company, Incorporated (MKC - Free Report) posted fourth-quarter fiscal 2018 results, wherein earnings and sales missed the Zacks Consensus Estimate. Performance during the period was weighed by adverse impacts of product mix, unfavorable currency as well as trade inventory reductions across retailers in the Americas.
Nevertheless, the top and the bottom line improved year over year. Results benefited from pricing actions, new product offerings and strength in the company’s base business. Further, management stated that it is on track with growth-oriented plans like the Comprehensive Continuous Improvement (CCI) program. Additionally, it also provided a positive view for fiscal 2019.
We note that robust growth initiatives are aiding this Zacks Rank #2 (Buy) stock. Evidently, shares of the company have gained almost 19.1% in the past six months, against the industry’s decline of 8%.
Coming back to results, adjusted earnings of $1.67 per share improved 8.4% on a year-over-year basis. Adjusted earnings were driven by favorable impacts of adjusted income tax rate, owing to reduced U.S. federal tax rate and discrete items. However, foreign currency rates had an unfavorable impact on the bottom-line performance. Further, we note that bottom-line missed the consensus mark of $1.70.
Revenues & Profits
In the quarter under review, McCormick, the global leader in flavors and spices, generated sales of $ 1,499.2 million. The top line inched up 0.6% from the prior-year quarter’s figure, including a 1% negative impact from currency. Despite the adverse impacts of trade inventory reductions in the Americas, sales gained from new products, advancement in the base business, augmented distribution and pricing actions. Further, the company’s consumer and flavor solutions units continued to be sturdy. On a constant-currency (cc) basis, the top line improved 2%. However, reported sales fell short of the Zacks Consensus Estimate of $1,550 million.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated Price, Consensus and EPS Surprise | McCormick & Company, Incorporated Quote
Gross profits in the fourth quarter rose nearly 2% to $681.5 million. Gross margin came at 45.5%, expanding 70 basis points (bps) from the prior-year quarter’s figure. However, on an adjusted basis, gross margin declined 30 bps, thanks to unfavorable impacts of product mix and partially countered by savings from the CCI program
Adjusted operating income declined almost 3.2% to $297.7 million due to unfavorable product mix, higher investments and increased distribution expenses. The decline includes a 1% adverse impact from currency. Further, adjusted operating income margin came in at 19.9%, depicting contraction of 70 bps.
Segment Details
Consumer Business: Sales inched up almost 0.6% to $984.4 million. At cc, sales improved 2% on improvements across all regions.
Sales in the Americas were flat, while it rose 1% on cc basis. This was mainly driven by pricing actions, volume growth from new products, augmented marketing and distribution support. Sales in the Asia/Pacific region grew 4%, while it improved 10% on cc basis driven by broad based volume improvements in China. In the EMEA region, sales remained flat, while it rose 3% in cc owing to broad based volume and productivity improvements.
Flavor Solutions: Sales in the segment rose 0.4% from the prior-year quarter’s tally to $514.8 million. At cc, sales increased 3% on improved performance in all regions.
Sales in the Americas grew 1% (up 2% at cc) driven by improved sales to quick service restaurants and increased sales of flavors and seasonings. Sales in the EMEA region decreased 2%, while it improved 5% at cc driven by pricing and favorable impacts from a major customer’s sales. Sales in the Asia/Pacific region declined 1%, while it rose 3% at cc owing to quick service restaurants sales.
Financial Update
McCormick exited the quarter with cash and cash equivalents of $96.6 million, long-term debt of $4,052.9 million and shareholders’ equity of $3,182.2 million.
For fiscal 2018, net cash provided by operating activities were $821.2 million, up 0.7% from $815.3 million in the prior-year quarter. The rise stemmed from net income growth.
Fiscal 2019 Guidance
Management expects continued rise in global demand for flavors and fresh food offerings. With strong growth strategies in place, the company expects to successfully meet consumers rising demand. Toward this end, the company is striving to utilize resources more efficiently as well as reduce costs to drive savings.
That said, management provided projections for fiscal 2019. The company expects sales to grow in the range of 1-3% (up 3-5% at cc). The company expects to achieve top-line growth completely on an organic basis, as it anticipates no benefits from acquisitions. That said, sales are likely to be driven by efforts like new product launches and expanded distribution and marketing. Further the company intends to achieve cost savings of almost $110 million in fiscal 2019, which will be utilized for growth-oriented investments and for offsetting high costs.
Adjusted earnings for fiscal 2019 are projected in the range of $5.17-$5.27, reflecting year-on-year rise of 4-6%. The bottom line is expected to grow 6-8% at cc. Also, the company anticipates strong cash flow for 2019.
Further, the company expects adverse currency impacts of nearly 2 percentage points on net sales, adjusted operating income as well as adjusted earnings per share.
Do Consumer Staples Stocks Entice You? Check These
Church & Dwight Co., Inc (CHD - Free Report) , with long-term earnings per share (EPS) growth rate of 10.2%, carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Estee Lauder Companies Inc (EL - Free Report) has long-term EPS growth rate of 12.1% and a Zacks Rank #2.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 12%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>