CAG ConAgra Brands Inc

McCormick & Co. Inc. (MKC) announced its financial results for the first-quarter and fiscal 2011 late last month.

Street analysts had a week to ponder the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.

Earnings Review

McCormick’s first-quarter earnings came in at 57 cents per share, which surpassed the Zacks Consensus Estimate by 5.5% and the year-ago earnings by 12%.

The quarterly earnings benefited from higher operating income, as well as the increase in income from unconsolidated operations.

Total revenue grew 2% year-over-year to $782.8 million from the year-earlier quarter, benefiting from pricing actions taken in response to increased raw and packaging material costs.

Revenues missed the Zacks Consensus Estimate of $850 million.

(Read our full coverage on this earnings report: McCormick Beats; Reaffirms Guidance)

Agreement of Estimate Revisions

Despite a strong first quarter, the analyst community has remained rather static over the past week for the two upcoming quarters as well as fiscal years 2011 and 2012.

Magnitude of Estimate Revisions

Due to the lack of movement in estimates over the past week, the Zacks Consensus Estimate for fiscal 2011 is unchanged at $2.83. For 2012, the Zacks Consensus Estimate has moved up a penny to $3.09 a share.

For the second and third quarters of fiscal 2011, estimates haven't moved and remain at 54 cents and 69 cents a share, respectively.

Our Recommendation

McCormick has a significant presence in the international market. The company’s consumer brands reach approximately 100 countries. The significant international presence has boosted its growth, and we believe will continue doing so in the coming years.

In addition, McCormick has made multiple acquisitions that have contributed to growth. Acquisitions have added 2% to average annual sales growth over the past five years.

However, though the company has completed multiple acquisitions that have expanded its product portfolio, such a strategy has inherent risks. Additionally, the competitive nature of the market in which McCormick operates is a matter of concern. We are currently Neutral on the stock.

McCormick which competes with ConAgra Foods, Inc. (NYSE: CAG - News) and Krafts Food Inc. (NYSE: KFT - News) currently holds a Zacks #3 Rank translating into a short term ‘Hold’ rating.

 
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