McCormick & Co. Inc.MKC delivered better-than-expected earnings in the second quarter of fiscal 2015. However, revenues lagged the consensus mark by a slight margin, possibly due to significant foreign currency headwinds.
Adjusted earnings of 75 cents per share beat the Zacks Consensus Estimate of 68 cents by 10.3%. Earnings also increased 17% from 64 cents per share earned a year ago, mainly due to a lower tax rate. Higher adjusted operating income, increased income from unconsolidated operations and lower shares outstanding also benefited earnings.
McCormick & Company Inc. - Earnings Surprise | FindTheBest
Revenues and Profits
The global leader in flavors and spices delivered second-quarter revenues of $1.024 billion, which lagged the Zacks Consensus Estimate of $1.037 billion by 1.3% and declined about 1% from the prior-year quarter. However, excluding currency headwinds, revenues grew 5%, driven by increased volume and product mix in both business segments.
Despite a positive sales environment, the company’s operating income was affected by unfavorable currency rates and higher material costs. However, excluding special charges, adjusted operating income increased 0.8% to $123 million in the second quarter.
However, on a constant currency basis, adjusted operating income grew 7% from the year-ago period, driven by sales growth and cost savings, offset in part by the unfavorable impact of higher material input costs and increased retirement benefit expense.
Segment Details
Consumer Business: Segment revenues grew 3% on a constant currency basis, driven by increased volume and a better product mix on the back of product innovation, brand marketing support and expanded distribution. Sales increased on a constant currency basis in all the regions of Americas, Europe, Middle East and Africa (EMEA) and the Asia/Pacific.
Adjusted operating income of the segment was $81 million, slightly lower than $86 million in the prior-year quarter. On a constant currency basis, adjusted operating income was flat with the benefit of sales growth and cost savings not being able to offset the unfavorable impact of higher material costs, increased retirement benefit expense and product mix.
Industrial Business: Segment revenues increased 7% year over year on a constant currency basis in the second quarter, driven by higher volume and product mix, as well as pricing actions. In addition, acquisitions added 1 percentage point of the year-on-year growth in the second quarter.
Sales increased on a constant currency basis in all the regions of Americas, Europe, Middle East and Africa (EMEA) and the Asia/Pacific.