Earnings Preview: McCormick - Analyst Blog
June 25 2012 - 9:00AM
Zacks
McCormick & Co. Inc. (MKC), processed and
packaged food maker, is all set to unveil its second quarter 2012
results on June 27, 2012, before the market opens. The Zacks
Consensus Estimate for the second quarter is 61 cents
(year-over-year increase of 10.9%). The Zacks Consensus Revenue
Estimate for the second quarter is $968 million (year-over-year
increase of 9.5%).
First Quarter Overview
McCormick reported first quarter 2012 earnings of 55 cents per
share, which surpassed the Zacks Consensus Estimate by 2 cents,
driven by top-line growth. The first quarter results were also
ahead of the company’s guidance of 51 to 54 cents per share.
However, earnings lagged the prior-year quarter's figure of 57
cents per share.
Total revenue in the quarter grew 16% year over year to $906.7
million. Revenue also exceeded the Zacks Consensus Estimate of
$868.0 million. The completion of acquisition of Kamis S.A. of
Poland and joint venture with India based Kohinoor Foods Ltd. in
fiscal 2011 contributed to 7% sales growth in the quarter.
(Read our full coverage on this earnings report: McCormick
Beats; Affirms Outlook).
Agreement of Estimates Revision
There has been no estimate revision for the current quarter over
the last 7 or 30 days. However, for fiscal 2012, 1 of 12 estimates
has moved down over the past 30 days. None of the estimates has
been revised upwards. Over the past 30 days, 1 of 9 estimates has
moved down for the fiscal 2013. There were no revisions over the
past 7 days for fiscal 2012 or fiscal 2013.
McCormick earnings are facing increasing pressure from rising
raw material costs. The rising input costs along with a negative
impact from currency changes are expected to hit the company’s
earnings hard in the second quarter of 2012.
Magnitude of Estimate Revisions
Given the limited estimate revisions, the consensus estimate for
the second quarter of fiscal 2012 has remained static over the last
7 as well as 30 days at 61 cents. Similarly, the consensus earnings
estimate has remained constant at $3.05 per share over the last 7
as well as 30 days for fiscal 2012. However, for fiscal 2013, the
estimate has gone down by a penny over the last 30 days from $3.35
to $3.34.
Surprise History
McCormick has surpassed earnings estimates in all of the last
four quarters. The company has recorded a maximum positive surprise
of 6.19% in the fourth quarter of 2011. On average, the earnings
surprise was 4.49%.
Our Recommendation
McCormick, which competes with ConAgra Foods,
Inc. (CAG) and Kraft Foods Inc. (KFT),
currently has a Neutral recommendation. The stock carries a Zacks
#3 Rank (a short-term ‘Hold’ rating).
CONAGRA FOODS (CAG): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
MCCORMICK & CO (MKC): Free Stock Analysis Report
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