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Factors Shaping McCormick's (MKC) Fate Ahead of Q2 Earnings

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McCormick & Company, Incorporated (MKC - Free Report) is slated to release second-quarter fiscal 2020 results on Jun 24. This provider of spices, seasonings and flavors delivered a positive earnings surprise of 4.9% in the last reported quarter. Further, it beat the Zacks Consensus Estimate by 5.8%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for the second quarter has gone up 2.7% to $1.14 per share over the past 30 days. However, this suggests a dip of 1.7% from the figure recorded in the year-ago period. Further, the consensus mark for revenues stands at $1,337 million, indicating a drop of 0.7% from the year-ago period’s reported figure.

Key Factors to Note

In its first-quarter earnings release, management said that it expects coronavirus-led increased at-home consumption and pantry loading to lead to elevated consumer demand in the Consumer Business segment. For the Flavor Solutions segment, the company notified that it expects high customer demand from packaged food players, though it anticipates lower demand from restaurants and other foodservice customers.

Further, the company has been paying premium pay incentives to its onsite U.S. workers who are required to keep the food supply operations flowing. This entails high costs. Apart from this, McCormick remains exposed to volatile currency movements.

Nonetheless, the company has been benefiting from its strong brand portfolio, courtesy of innovation and buyout gains. McCormick’s acquisition of the food division of RB Foods (concluded in August 2017) is noteworthy in this regard. The company also continues to improve brand performance through well-chalked marketing strategies, including digital marketing. Further, McCormick’s focus on saving costs and enhancing productivity through its Comprehensive Continuous Improvement program bodes well.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for McCormick this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

McCormick currently has a Zacks Rank #2 and an Earnings ESP of +4.57%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat.

Helen of Troy (HELE - Free Report) has an Earnings ESP of +11.48% and a Zacks Rank #1.

Kimberly-Clark (KMB - Free Report) has an Earnings ESP of +1.78% and a Zacks Rank #2.

General Mills (GIS - Free Report) has an Earnings ESP of +2.10% and a Zacks Rank #3.

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