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McCormick Blew Past 2Q17 Estimates, but Stock Fell 3.6%

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Part 3
McCormick Blew Past 2Q17 Estimates, but Stock Fell 3.6% PART 3 OF 7

McCormick Tops Sales Estimates and Reaffirms Guidance

What’s behind MKC’s strong sales?

McCormick’s (MKC) fiscal 2Q17 sales of $1.1 billion exceeded analysts’ estimate with a rise of 4.8% YoY (year-over-year), reflecting a strong performance in the Americas and China (FXI), partially offset by softness in Europe, the Middle East, and Africa (EMEA). On the contrary, other food manufacturers including General Mills (GIS), J.M. Smucker (SJM), and Kellogg (K) are struggling to lift their sales in North America.

McCormick Tops Sales Estimates and Reaffirms Guidance

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McCormick commands the lion’s share of the spices and seasonings market thanks to its industry-leading brands. During the reported quarter, McCormick’s top line benefitted from new product launches, higher pricing, and expanded distribution. Besides, the company’s strategic acquisition of Gourmet Garden in 2016 helped in generating incremental sales.

Acquisitions have been a key part of McCormick’s industry-leading growth. Last fiscal year, the company acquired Gourmet Garden, Cajun Injector, and Giotti, which not only resulted in expanding its portfolio of brands but also fortified its product pipeline. Management noted that acquisitions added an incremental 3% growth to its sales in fiscal 2Q17.

Outlook

McCormick’s management reaffirmed its sales guidance for fiscal 2017. The company expects its top line to improve in the range of 5% to 7%, excluding the impact of currency. Management noted that currency movements would have a lower impact on sales than it previously guided. Thus, the company now projects its sales to grow in the range of 4% to 5% including the negative impact of adverse currency movements. Earlier, management guided for an improvement of 3% to 5%.

McCormick’s innovative product pipeline and focus on the expansion of distribution channels is expected to drive the company’s top line in fiscal 2017. Besides, its planned price restructuring initiatives and strategic acquisitions will further support sales growth.

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