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McCormick (MKC +4%) is spicing it up today as investors approve of its Q2 (May) earnings results this morning. This supplier of spices, seasoning mixes, and condiments reported it largest EPS beat in any quarter for the last three years. Revenue dipped 1% yr/yr to $1.64 bln, which was generally in-line. MKC also reaffirmed FY24 EPS and revenue guidance.

• MKC operates two segments: Consumer (56% of 1HFY24 revs) and Flavor Solutions (44%), which caters to food manufacturers and foodservice customers. In Q2, volume growth in its Consumer segment was offset by declines in Flavor Solutions related to softness in some of its QSR and packaged food customers volumes.
• Consumer segment sales decreased 1% yr/yr to $904.5 mln. Volumes improved substantially from Q1. In the Americas, MKC has delivered solid sequential volume improvement for three consecutive quarters. FS segment sales also declined 1% to $738.8 mln where a 1% increase from pricing was offset by a 2% decline in volume and product mix. Although certain parts of its FS business are pressured, MKC expects volume trends to improve in 2H.
• MKC says that consumers continue to exhibit value seeking behavior, especially mid to low income households. Consumers continue to buy just what they need and make more frequent trips to the store. On the positive side, consumers are cooking at home more. As a result, certain categories such as Spices & Seasonings, as well as condiments and sauces are seeing a benefit amid these trends.
• The company says it's energized for grilling season and expects its Flame and Flavor marketing campaign that launched in Q2 will drive incremental consumer demand. MKC also said its Cholula salsas and recipe mixes that launched in 2023 are driving new buyers to the category and continues to exceed expectations since launch. In 2024, MKC is launching nearly 4x more grilling rubs and seasonings compared to 2023. On the FS side, inflation in the foodservice channel is leading to softness in food-away-from-home consumption. That is impacting restaurant traffic particularly with QSRs.

Overall, after some lackluster results in recent quarters, MKC's results in the first half of 2024 were welcome news. We think the robust EPS beat and positive comments on the call are driving shares today. Also, the share price has been lackluster since the Q1 report. As such, we think sentiment was low heading into this report, so the big EPS beat generated some excitement.