McCormick & Co. Inc. (MKC) announced its
financial results for the third quarter of 2011 on September
28.
Earnings Review
McCormick’s third-quarter earnings came in at 69 cents per
share, and surpassed the Zacks Consensus Estimate by 6.2%. However,
earnings lagged the year-ago earnings by 9.2%.
The quarterly earnings benefited from favorable operating income
and cost savings. Moreover, new products, increased distribution
and brand marketing were able to offset business weaknesses.
Total revenue grew 16% year over year to $920.4 million from the
year-earlier quarter, benefiting from McCormick’s favorable volume,
product mix and pricing actions taken to curtail increased raw and
packaging material costs. Revenue also exceeded the Zacks Consensus
Estimate of $870 million.
(Read our full coverage on this earnings report: McCormick
Beats, Re-Affirms Outlook)
Agreement of Estimate Revisions
Despite a strong third quarter, the analysts' community has
remained rather static over the past week for the two upcoming
quarters as well as fiscal year 2012. However, they are a little
positive for fiscal 2011.
Out of the 13 analysts covering the stock, 4 have revised their
estimates downward for the upcoming quarter over the past 30 days,
while none of the analysts showed a positive trend. Similarly for
the first quarter of 2012, only one out of 5 analysts reduced its
estimates, with none increasing their estimates over the same
period.
However, for the current fiscal 2011, only one out of 13
analysts increased his estimates over the past 30-day period, with
none lowering their estimates. On the other hand, one out of 14
analysts lowered his estimates with none raising it for fiscal
2012.
During the quarter, the company has not only successfully
completed its acquisitions and joint ventures, but launched new
products, invested in brand marketing and expanded distribution
with its growth strategies. However, we believe that the company is
feeling the impact of the current economic environment.
Many consumers are struggling in this economy, and some are
altering their shopping patterns. In the U.S. and the U.K., the
analysts have seen a shift in private label sales for basic
ingredients like pepper, garlic and cinnamon, which is expected to
impact the sales in future.
Magnitude of Estimate Revisions
Therefore, there has been a marginal shift in the estimates over
the past 30-day period. The Zacks Consensus Estimate for the fourth
quarter of 2011 has declined by a penny to $1.01 per share.
However, the estimates remained unchanged for the first quarter of
2012, and fiscal years 2011 and 2012 at 62 cents, $2.79 per share
and $3.12 per share, respectively.
Founded in 1889 and based in Sparks, Maryland, McCormick is a
leading manufacturer, marketer and distributor of spices,
seasonings, specialty foods and flavors for the entire food
industry, across the globe. The company’s key sales, distribution
and production facilities are located in North America and Europe.
Furthermore, the company has facilities in Mexico, Central America,
Australia, China, Singapore, Thailand and South Africa.
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.
However, the company has started experiencing further increases
in the costs of raw materials, and is expecting a double-digit rate
of material cost inflation in the remainder of 2011, and further
expects these higher costs to persist through 2012. Additionally,
the competitive nature of the market in which McCormick operates is
a matter of concern.
McCormick, which competes with ConAgra Foods,
Inc. (CAG) and Kraft Foods Inc. (KFT),
currently holds a Zacks #4 Rank translating into a short term
‘Sell’ rating. Over the long term, we provide a Neutral
recommendation on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use today.
The Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months). These
“Earnings Estimate Scorecard” articles help analyze the important
aspects of estimate revisions for each stock after their quarterly
earnings announcements. Learn more about earnings estimates and our
proven stock ratings at: http://www.zacks.com/education/
CONAGRA FOODS (CAG): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
MCCORMICK & CO (MKC): Free Stock Analysis Report
Zacks Investment Research
ConAgra Brands (NYSE:CAG)
Historical Stock Chart
From May 2024 to Jun 2024
ConAgra Brands (NYSE:CAG)
Historical Stock Chart
From Jun 2023 to Jun 2024