Why McCormick Expects Its Fiscal 2Q17 EPS to Remain Flat



What analysts project for MKC

McCormick & Company is set to report its fiscal 2Q17[1. fiscal 2Q17 ended May 31, 2017] results on Thursday, June 29. Analysts covering McCormick (MKC) stock expect the company to post adjusted EPS (earnings per share) of $0.76, reflecting YoY (year-over-year) growth of 1.3%.

The graph below shows that the company has met or exceeded analysts’ estimates in the past five quarters, supported by strong sales and cost-saving measures.

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In comparison, analysts expect MKC’s peer General Mills (GIS) to report a 7.6% rise in its EPS for the upcoming quarter. Unlike McCormick, which is witnessing balanced top-line and bottom-line growth despite industry-wide challenges, General Mills’s EPS is expected to benefit from cost-saving initiatives amid slowing sales.

ConAgra Foods (CAG) is also scheduled to report its fiscal 4Q17 results on June 29. Analysts expect its bottom line to decline on a YoY basis.

Factors that could impact McCormick’s EPS

McCormick’s (MKC) EPS is likely to benefit from strong sales. This trend is in contrast to its peers, which are relying heavily on restructuring and cost-cutting measures to drive profitability.

McCormick’s management stated that the company’s business segments are expected to post healthy top-line and bottom-line growth. This growth should be driven by an innovative product pipeline, its focus on digital marketing, and its expanded distribution channels. McCormick projects savings of $100 million in costs for fiscal 2017, which could further cushion its profitability.

Despite the leverage from sales and its cost-cutting measures, McCormick’s management expects its EPS to remain flat in fiscal 2Q17. The company’s increased brand marketing spending, higher effective tax rate, and adverse currency fluctuations could restrict its bottom-line growth.

With respect to fiscal 2017, McCormick’s management expects the company’s adjusted EPS to reach $4.05–$4.13, representing 7%–9% growth.


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