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Acquisitions Could Drive McCormick’s Top Line

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Consensus estimate

In the past four quarters, McCormick (MKC) has been impressive with its stellar top-line growth due to incremental sales from acquired brands. In the third quarter, analysts remain upbeat. Analysts expect McCormick (MKC) to sustain the sales growth momentum. On average, analysts expect McCormick to report net sales of $1.4 billion in the third quarter, which reflects 14.8% growth year-over-year.

Other major food companies like Kellogg (K), Conagra Brands (CAG), Hershey (HSY), and General Mills (GIS) are also gaining from their recent acquisitions. Incremental sales from these acquired brands are accelerating the companies’ top-line growth rate.

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Factors driving McCormick’s top line

Acquisitions have been the key catalyst behind McCormick’s stellar sales growth. McCormick has a rich history of acquiring fast-growing brands. The acquisitions have been driving its top line. The company’s recent acquisition of RB Foods contributed significantly to its top-line growth in last reported quarter. Meanwhile, analysts expect the RB Foods’ acquisition to continue to support McCormick’s sales in the third quarter.

Besides acquisitions, strength in its base business, new products, and distribution gains will likely drive McCormick’s top line.

By business divisions, McCormick’s management expects the sales at its Consumer segment in the second half of 2018 to benefit from the grilling and holiday season. Distribution gains in spices and seasonings, new products, higher net price realization, and brand marketing will likely drive the segment’s top line. The company’s Flavor Solutions segment is expected to benefit from new products and customers, expanded distribution, promotional activity, and acquisitions.

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