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Earnings Preview: McCormick

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McCormick & Company, Inc. (MKC - Free Report) is set to report fiscal first quarter 2013 results before the opening bell on Apr 2. Last quarter, this global leader in flavors posted a 3.48% negative surprise. Let’s see how things are shaping up prior to the announcement.

Factors This Past Quarter

McCormick’s sales and earnings both lagged the Zacks Consensus Estimate in fourth quarter fiscal 2012 as the company experienced disappointing retailer buying patterns and temporary supply chain disruptions in the Americas region and lower demand from industrial customers in the Asia/Pacific region.

Also, the unfavorable mix of businesses negatively impacted operating income in the industrial segment in the quarter. Though earnings and revenues increased on a year-over-year basis driven by acquisitions benefits, positive volume, and improved product/ pricing mix; high input costs and currency headwinds remained an overhang in the quarter.

Earnings Whispers

The Zacks Consensus Estimate for the first quarter stands at 56 cents. Estimates have mostly seen a downward trend ahead of the first quarter results, due to an expectation of soft results from industrial segment.

Though McCormick remains on track to implement a new inventory management process in order to improve inventory levels, the difficult global economy ahead and material cost pressure is expected to hurt the sales in the coming quarters.

The stock carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, #2 or #3 to beat earnings estimates. You could, however, consider other consumer staples stocks like:

  • Pilgrim’s Pride Corp. (PPC - Free Report) , Earnings ESP of +138.46% and a Zacks Rank #1 (Strong Buy)
  • Flowers Foods Inc. (FLO - Free Report) , Earnings ESP of +5.13% and a Zacks Rank #1 (Strong Buy)
  • Kellogg Co. (K - Free Report) , Earnings ESP of +0.98% and a Zacks Rank #2 (Buy)

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