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What Could Drive McCormick’s Q4 Revenues?

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Dec. 4 2020, Updated 10:52 a.m. ET

Consensus estimate

McCormick (MKC) has reported stellar top-line growth in the past several quarters. McCormick’s top line has grown at an average rate of 18.2% in the past four quarters thanks to the incremental sales from its acquired brands. As for the fourth quarter, analysts expect McCormick to sustain the growth momentum and report net sales of $1.55 billion, up about 4% on a YoY basis. The projected growth rate reflects a steep deceleration in the sales growth rate as can be seen in the graph below.

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Growth drivers

McCormick’s net sales are expected to benefit from the continued strength in the underlying business. McCormick’s focus on innovation, new products, brand marketing investments, and strengthening of distribution are likely to drive the fourth-quarter revenues. However, the sales growth rate is projected to slow down on a quarter-over-quarter basis as McCormick lapped its acquisition of RB Foods.

McCormick is among the very few packaged food manufacturers in the US that have managed to impress with its underlying business in 2018. In contrast, the majority of food manufacturers are witnessing tepid demand and have reported sluggish organic sales in the past several quarters. However, acquisitions and innovation have helped food companies accelerate net sales growth.

For instance, General Mills (GIS), J.M. Smucker (SJM), Kellogg (K), Hershey (HSY), and Conagra Brands (CAG) have reported YoY improvement in net sales, driven by incremental sales from their acquired brands.

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