Earnings Preview: McCormick - Analyst Blog
September 26 2012 - 4:30AM
Zacks
Spice maker, McCormick & Company, Inc.
(MKC) is all set to report its fiscal third quarter 2012 results
before the market opens on September 27, 2012. The Zacks Consensus
Estimate for the third quarter is pegged at 76 cents (estimated
year-over-year increase of 10.2%) on revenues of $991 million
(year-over-year increase of 7.7%).
Second Quarter Recap
McCormick delivered strong second quarter 2012 earnings of 60
cents, which beat the prior-year quarter’s earnings by 9%. The
results were driven by favorable operating income and tax rate,
offset by lower income from unconsolidated operations and higher
interest expense. Earnings in the quarter, however, lagged the
Zacks Consensus Estimate by a penny.
Total revenue in the quarter grew 11% year over year to $984
million. Revenue also exceeded the Zacks Consensus Estimate of
$968.0 million. On a constant currency basis, revenue increased
13%, half of which was contributed by acquisitions completed in
2011. McCormick’s price increase in response to high input costs,
volume growth and favorable product mix also contributed to the
overall revenue growth.
Agreement of Estimate Revisions
There has been no estimate revision for the current quarter or
the fiscal year over the last 7 days. However, over the last 30
days, 1 of 13 estimates has moved up for the fiscal 2012. None of
the estimates has been revised downwards. There has been no
estimate revision for the current quarter over the last 30
days.
Magnitude of Estimate Revisions
Given the limited estimate revisions, the consensus estimates
for the third quarter as well as for full year 2012 have remained
static over the last 7 as well as 30 days at 76 cents and $3.05,
respectively.
At the second quarter conference call, management had maintained
its sales and earnings guidance which was again later reaffirmed at
an investor conference held in early September. There have been no
major new updates since then, which explain the lack of estimate
revisions.
Surprise History
Over the past four quarters, McCormick has surpassed estimates
thrice and missed once, thereby resulting in an average earnings
estimate of 3.62%. The company recorded a maximum positive surprise
of 6.19% in the fourth quarter of 2011.
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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