Will McCormick Stock Rise Due to the RB Foods Acquisition?



YTD stock performance

As of July 18, 2017, McCormick (MKC) stock has outperformed most of its peers in terms of growth on a YTD (year-to-date) basis. The company’s stock rose 4.1% during this period. In the meantime, the company’s peers including Conagra Brands (CAG), Campbell Soup (CPB), General Mills (GIS), Kellogg (K), J.M. Smucker (SJM), Kraft Heinz (KHC), Tyson Foods (TSN), and Mondelēz (MDLZ) saw their stock prices trading in red.

Despite performing better than its peers, McCormick stock underperformed the broader index. Since the beginning of 2017, the S&P 500 Index (SPX-INDEX) has generated a return of 9.9%. Notably, McCormick stock witnessed a steep decline in the past month despite posting industry-leading growth.

McCormick is facing growing competition from private label products, which is impacting its market share. Persisting challenges in its European business and negative currency movements are impacting its sales and profitability.

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Will the stock move higher

Despite persisting challenges, McCormick is the fastest-growing company in the food space. It managed to accelerate sales growth due to strategic acquisitions. McCormick’s acquisition of RB Foods is expected to boost its sales and margins, which should lift investors’ sentiment on the stock.

McCormick is expected to post strong results during 2H17. The company’s innovative product pipeline, expanded distribution, and price restructuring could lift its sales. Meanwhile, the company’s new products are resonating well with consumers, which should help drive the demand. However, McCormick’s high valuation might keep investors at bay.


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