We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
McCormick (MKC) Up 12% in 6 months: What's Driving the Stock?
Read MoreHide Full Article
McCormick & Company Inc. (MKC - Free Report) is offering investors a treat, courtesy of its spectacular earnings and sales history backed by well-chalked buyouts, robust savings efforts and effective marketing policies.
Evidently, shares of this seasonings, spices and specialty foods giant have returned 12.4% over the past six months, outperforming the industry’s decline of 1.2%. In fact, the company’s shares recently hit a new 52-week high of $111.46 during the trading session on Mar 12, eventually closing at $110.69.
Let’s take a closer look at the factors driving the company’s impressive performance and see if it can add new strides to its growth story in the forthcoming periods.
Acquisitions: A Vital Growth Driver
McCormick has been strengthening its presence through acquisitions to expand its portfolio. Notably, a number of companies operating in the food industry such as Campbell Soups (CPB - Free Report) , Kellog (K - Free Report) and Conagra Brands (CAG - Free Report) have been resorting to strategic buyouts and widen their prospects. In fact, McCormick’s acquisition of the food division of Reckitt Benckiser Group plc (RB Foods) in August 2017, is the largest deal till date. The deal has enabled the addition of iconic brands to McCormick’s portfolio, thereby positioning the company in the leading U.S. condiments category.
In the past, the company has made significant acquisitions, including that of Italy-based Enrico Giotti SpA (Dec 2016) and Australia-based Botanical Food Company (April 2016). Markedly, additional sales from buyouts of RB Foods, Giotti and Gourmet Garden contributed 6% to the company’s constant currency sales growth in fiscal 2017. Also, management expects additional sales from RB Foods to contribute 8% to fiscal 2018 sales growth.
Cost-Saving Efforts
McCormick focuses on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program. The program has enabled the company to increase investments, which lead to higher sales and profits. Notably, cost savings through CCI and streamlining actions reached $117 million in fiscal 2017, up from $109 million in fiscal 2016. McCormick is on track with its four-year targeted savings of around $400 million by November 2019. Notably, cost savings from CCI helped the company deliver double-digit adjusted operating income growth in the fourth quarter. The adjusted operating margin expanded 220 basis points (bps), marking the eighth consecutive quarter of margin improvement. Further, gross margin increased 180 bps in the fourth quarter and is likely to expand in a range of 150-20 basis points in fiscal 2018. The company projects adjusted operating income growth in the range of 23-25% in fiscal 2018, wherein it plans to achieve cost savings of $100 million.
McCormick regularly enhances products through innovation to stay competitive and tap the evolving demand for new flavors, spices and herbs. Health and wellness continues to bolster the innovation agenda. The company is planning to offer innovative flavors in breakfast platform and ready-to-serve gravies. McCormick is also shaping up its portfolio with gluten-free, non-GMO and organic products to cater to the evolving needs of consumers. In 2016, the company renovated its core products, with non-GMO labeling on everyday spices and seasonings.
Escalated Costs a Worry
McCormick continues to incur higher raw material costs and witnesses increased brand marketing and freight expenses. Rising costs affected the company’s performance in the fourth quarter. In fiscal 2018, the company expects material costs to escalate in low-single digits. Further, McCormick is also planning to increase brand marketing expenses to drive sales.
Wrapping it Up
Although McCormick has been struggling against escalated expenses, we expect such downturns to be sufficiently cushioned by the company’s well-planned savings and efficiency building initiatives. Moreover, this Zacks Rank #3 (Hold) company’s rich portfolio of iconic brands combined with sustained efforts keeps it well positioned to achieve greater highs in the forthcoming periods
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Image: Bigstock
McCormick (MKC) Up 12% in 6 months: What's Driving the Stock?
McCormick & Company Inc. (MKC - Free Report) is offering investors a treat, courtesy of its spectacular earnings and sales history backed by well-chalked buyouts, robust savings efforts and effective marketing policies.
Evidently, shares of this seasonings, spices and specialty foods giant have returned 12.4% over the past six months, outperforming the industry’s decline of 1.2%. In fact, the company’s shares recently hit a new 52-week high of $111.46 during the trading session on Mar 12, eventually closing at $110.69.
Let’s take a closer look at the factors driving the company’s impressive performance and see if it can add new strides to its growth story in the forthcoming periods.
Acquisitions: A Vital Growth Driver
McCormick has been strengthening its presence through acquisitions to expand its portfolio. Notably, a number of companies operating in the food industry such as Campbell Soups (CPB - Free Report) , Kellog (K - Free Report) and Conagra Brands (CAG - Free Report) have been resorting to strategic buyouts and widen their prospects. In fact, McCormick’s acquisition of the food division of Reckitt Benckiser Group plc (RB Foods) in August 2017, is the largest deal till date. The deal has enabled the addition of iconic brands to McCormick’s portfolio, thereby positioning the company in the leading U.S. condiments category.
In the past, the company has made significant acquisitions, including that of Italy-based Enrico Giotti SpA (Dec 2016) and Australia-based Botanical Food Company (April 2016). Markedly, additional sales from buyouts of RB Foods, Giotti and Gourmet Garden contributed 6% to the company’s constant currency sales growth in fiscal 2017. Also, management expects additional sales from RB Foods to contribute 8% to fiscal 2018 sales growth.
Cost-Saving Efforts
McCormick focuses on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program. The program has enabled the company to increase investments, which lead to higher sales and profits. Notably, cost savings through CCI and streamlining actions reached $117 million in fiscal 2017, up from $109 million in fiscal 2016. McCormick is on track with its four-year targeted savings of around $400 million by November 2019. Notably, cost savings from CCI helped the company deliver double-digit adjusted operating income growth in the fourth quarter. The adjusted operating margin expanded 220 basis points (bps), marking the eighth consecutive quarter of margin improvement. Further, gross margin increased 180 bps in the fourth quarter and is likely to expand in a range of 150-20 basis points in fiscal 2018. The company projects adjusted operating income growth in the range of 23-25% in fiscal 2018, wherein it plans to achieve cost savings of $100 million.
Innovation & Inclination Toward Healthy Food Offerings
McCormick regularly enhances products through innovation to stay competitive and tap the evolving demand for new flavors, spices and herbs. Health and wellness continues to bolster the innovation agenda. The company is planning to offer innovative flavors in breakfast platform and ready-to-serve gravies. McCormick is also shaping up its portfolio with gluten-free, non-GMO and organic products to cater to the evolving needs of consumers. In 2016, the company renovated its core products, with non-GMO labeling on everyday spices and seasonings.
Escalated Costs a Worry
McCormick continues to incur higher raw material costs and witnesses increased brand marketing and freight expenses. Rising costs affected the company’s performance in the fourth quarter. In fiscal 2018, the company expects material costs to escalate in low-single digits. Further, McCormick is also planning to increase brand marketing expenses to drive sales.
Wrapping it Up
Although McCormick has been struggling against escalated expenses, we expect such downturns to be sufficiently cushioned by the company’s well-planned savings and efficiency building initiatives. Moreover, this Zacks Rank #3 (Hold) company’s rich portfolio of iconic brands combined with sustained efforts keeps it well positioned to achieve greater highs in the forthcoming periods
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>