Analysts’ recommendations for McCormick
In this article, we’ll see what Wall Street analysts recommend for McCormick & Company (MKC) after its fiscal 1Q16 earnings release. We’ll also look at analysts’ target prices for MKC over the next 12 months. Approximately 58% of analysts rate MKC a “hold,” 17% rate it a “buy,” and 25% rate it a “sell.”
Analysts’ target prices for McCormick
The average broker target price for MKC has risen to $91.14 from $85.71. This is ~9% lower than the closing price of $99.75 on March 30. The company’s peers ConAgra Foods (CAG), Flowers Foods (FLO), and Pinnacle Foods (PF) have average broker target prices of $48.10, $18.63, and $48.92, respectively. These figures imply returns of 7%, 0.35%, and 10.0%, respectively, over the next 12 months.
McCormick is a component of the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS). RHS invests 2.5% of its portfolio in MKC. It also invests 2.7% of its holdings in CAG.
Bernstein increased its target price for McCormick from $100 to $113. This target price is 13% higher than the closing price of $99.75 on March 30. Bernstein rates McCormick a “strong buy.”
A valuation multiple helps investors decide whether to enter or exit a stock. A company’s valuation multiple is impacted by various factors, including its perceived growth and risk, as well as investors’ willingness to pay. We’ll use the forward PE (price-to-earnings) multiple to compare McCormick with its peers. What a forward PE valuation multiple indicates is how much an investor is willing to pay for the company’s next four quarters of EPS (earnings per share).
McCormick outperforms its peers on forward PE multiple
McCormick is trading at a higher forward PE multiple than its peers. MKC has a forward PE multiple of 26.4x for the next 12 months, as of March 30. McCormick’s positive growth expectations for revenue and earnings in fiscal 2016 justify the higher PE multiple. Wall Street expects McCormick’s earnings and revenue to rise 7% and 2%, respectively, in fiscal 2016. Pinnacle Foods, on the other hand, is trading at 21.1x. ConAgra Foods is trading at the lowest PE multiple of 18.7x.