Maryland-based spices and seasonings manufacturer, McCormick (MKC
146.14, +2.21, +1.54%), made a three-month high on Tuesday morning in reaction
to better than expected first quarter profit.
McCormick saw slowing sales growth in the final quarter of last year and reported more of the same this morning. Last quarter McCormick snapped a four-quarter streak of double-digit sales growth with “just” 0.6% higher revenues than the prior year. This result was a miss, and McCormick subsequently missed on the bottom line while also offering, at the time, downside guidance for FY19.
Management reported more of the same in the first quarter this morning, though the company was able to beat on the bottom line in part due to adjusted operating income growth and a lower adjusted tax rate, and despite an unfavorable impact from currency.
First quarter adjusted earnings per share came in at $1.12 on revenue growth of 1.3% to about $1.23 bln. In constant currency, the company grew sales 4%.
Consumer segment sales were flat at $744.9 mln with a 3% unfavorable impact from currency. Excluding the unfavorable currency impact, consumer sales grew in each region driven by new products, expanded distribution and strong marketing and promotional programs.
Flavor solutions segment sales grew by 3% to $486.6 mln, including a 3% unfavorable impact from currency. Flavor solutions sales growth was driven by the Americas and Europe, Middle East and Africa (EMEA) regions attributable to new products and higher base business volume and product mix.
President and CEO Lawrence Kurzius added that fundamentals at MKC are very strong and the company remains confident the initiatives that are underway in 2019 position the company to continue its growth trajectory. In light of thatMKC reaffirmed certain guidance metrics this morning, namely earnings and sales targets.
For FY19 then the company still sees EPS growth of 4-6% to $5.17-5.27. Additionally, the company still expects to grow sales compared to 2018 by 1-3%, consisting entirely of organic growth as the company has no incremental sales impact from acquisitions in 2019.Sales growth is also expected to include the impact of pricing taken to offset an anticipated low-single digit increase in costs. What’s more, the company has plans to achieve around $110 mln of cost savings and intends to use these savings to improve margins, fund investments to drive continued growth, and as a further offset to increased costs.
The stock has put together a tidy recovery off post-Q4 lows, up 5.0% since the start of the year vs the 12.7% higher move in the S&P 500 over that time. From the post-Q4 lows shares have recovered more than 22%.
- OUR VIEW
- LEARNING CENTER