How McCormick Stock Could React to Its Fiscal 2Q17 Earnings
McCormick & Company (MKC) is a leading name in the spices and flavor products sector. Through its strong brand portfolio, marketing programs, product innovation, and strategic acquisitions, the company increased its sales despite widespread softness in the food industry.
As consumer spending remains weak, McCormick is focusing on reducing costs and streamlining operations to generate incremental savings and boost its profitability.
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On a YTD (year-to-date) basis, McCormick (MKC) stock has generated an 8.3% return, which is higher than our select peer group. On June 20, 2017, J.M. Smucker (SJM), General Mills (GIS), and ConAgra Brands (CAG) saw their stock prices fall 4.4%, 8.1%, and 4.5%, respectively.
In terms of stock price appreciation, the company has performed almost on par with the broader index. The Consumer Staples Select Sector SPDR ETF (XLP) and the S&P 500 (SPX) have generated returns of 8.3% and 8.9%, respectively, on a YTD basis.
What could restrict the upside?
McCormick’s (MKC) fiscal 2Q171 bottom line is expected to remain flat as increased brand promotional spending, increased material costs, and a higher effective tax rate could restrict the company’s profitability growth. However, the company’s planned pricing action and cost-cutting initiatives are expected to offset these headwinds.
Most of the analysts covering McCormick remain neutral on the stock. Weak consumer uptake, mainly in the US, and the company’s high valuation could be keeping them on the sidelines.
McCormick (MKC) is set to announce its fiscal 2Q17 results on June 29, 2017. We’ll focus on analysts’ expectations for the company’s sales and profitability in this series. We’ll also discuss MKC stock compared to its peers in terms of analysts’ recommendations and valuations.
- fiscal 2Q17 ended May 31, 2017 ↩