Analysts have a neutral outlook
McCormick (MKC) has reported a strong sales and earnings growth rate for the past several quarters thanks to the benefits from its RB Foods acquisition. Also, a lower effective tax rate drove its double-digit EPS growth rate. McCormick is among the very few packaged food companies that have reported improved underlying sales and have managed to expand margins.
However, analysts maintain a neutral rating on MKC stock as most of the benefits are already priced in its stock. Further, McCormick’s top and bottom line growth rate is expected to decelerate as the company annualized its RB Foods acquisition and now faces tough YoY comps.
We expect new products, expanded distribution, and innovation to drive underlying sales. Meanwhile, cost-savings and operating leverage are likely to drive bottom-line growth in coming quarters. However, higher interest expenses and an increased outstanding share count could restrict the bottom-line growth.
Rating and target price
Among the 11 analysts covering MKC stock, nine analysts suggest a “hold,” one analyst recommends a “buy,” and one analyst maintains a “sell” rating. Analysts have a consensus target price of $133.72 per share on MKC stock, which implies a downside of 4.8% based on its closing price of $140.48 on January 17.