McCormick & Company, Incorporated MKC delivered solid fourth-quarter fiscal 2024 results, wherein the top and bottom lines came ahead of the Zacks Consensus Estimate, and sales increased year over year.
The company’s strategic investments in key categories helped it fuel volume growth, expand margins and deliver solid earnings improvement in fiscal 2024. Looking into 2025, management remains positive about sustaining its solid momentum, driven by its growth strategies, brand strength and demand for flavor.
McCormick continues to bolster its position across major markets and core categories by focusing on growth levers such as brand marketing, product and packaging innovation, category management and proprietary technology. The company expects its cost-saving initiatives to help fund future investments and drive operating margin expansion.
MKC’s Quarterly Performance: Key Metrics and Insights
Adjusted earnings of 80 cents per share declined from 85 cents reported in the year-ago quarter. However, the bottom line came above the Zacks Consensus Estimate of 77 cents per share. The year-over-year downside can be attributed to reduced operating income and increased tax rates.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
This global leader in flavor generated sales of $1,798 million, up nearly 3% year over year, including a 1% gain from currency movements. Organic sales grew 2% on volume and product mix. The top line exceeded the Zacks Consensus Estimate of $1,766 million.
McCormick’s gross profit margin expanded by 20 basis points. The upside can be attributed to cost savings from the company’s Comprehensive Continuous Improvement (CCI) program.
The adjusted operating income came in at $308 million, down from the $311 million in the year-ago period. Adjusted operating income fell 1% on a constant currency basis due to elevated SG&A expenses, stemming from elevated technology and distribution costs. This was partly made up of higher sales, gross margin growth and CCI-related cost savings.
Decoding MKC’s Segmental Performance
Consumer: Sales jumped 4% to $1,085 million, with a 1% positive impact from currency movements. Organic sales advanced 3%, with a 4% jump in volume and product mix, somewhat negated by a 1% dip in pricing. Sales grew 3.7% in Americas while moving up 7.8% in the EMEA region. Segment sales dipped 6.9% in the APAC.
Flavor Solutions: Sales in the segment inched up 1% to $713 million, with negligible currency effects. Organic sales climbed 1% on pricing. Flavor Solutions’ sales in the Americas dipped 0.2%. Flavor Solutions’ sales in the EMEA climbed 1.6%. Sales in the APAC market jumped 11.1% year over year.
MKC’s Financial Health Snapshot
McCormick exited the quarter with cash and cash equivalents of $186.1 million, long-term debt of $3,593.6 million and total shareholders’ equity of $5,316.8 million. In the twelve months ended Nov. 30, 2024, net cash provided by operating activities was $921.9 million.
Management expects to record robust cash flow in fiscal 2025, and expects to return a considerable part of its cash flow to stockholders via dividends.
What to Expect From MKC in 2025?
For fiscal 2025, McCormick is focused on strengthening its volume trends and prioritizing investments to fuel profits while acknowledging the volatility of the macro and consumer landscape. The company’s CCI program continues to support growth investments and operating margin expansion. Management anticipates currency movements to lower fiscal 2025 sales and adjusted operating income by 1% each, while adversely impacting adjusted EPS by 2%.
For fiscal 2025, management expects sales growth in the range of flat to increase 2% (up 1-3% at constant currency). Sales are likely to be backed by volume-led growth across both company segments, and gradual improvement in China consumers.
Management expects adjusted operating income to grow 3-5%, and increase 4-6% at constant currency. This is likely to be driven by gross margin expansion, somewhat offset by a rise in brand marketing investments.
Management envisions fiscal 2025 adjusted EPS in the band of $3.03-$3.08, which suggests a 3-5% increase from the year-ago period. On a constant currency basis, the adjusted EPS is expected to increase 5-7%. On a GAAP basis, McCormick projects fiscal 2025 earnings in the range of $2.99-$3.04 per share, indicating 2-4% year-over-year growth.
This Zacks Rank #3 (Hold) stock has rallied 11.3% in the past year against the industry’s decline of 9.8%.
Some Solid Staple Bets
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely United Natural Foods, Inc. UNFI, Freshpet FRPT and Tyson Foods TSN.
United Natural currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.
Tyson Foods, a meat products behemoth, currently carries a Zacks Rank #2 (Buy). TSN delivered a trailing four-quarter average earnings surprise of around 57%.
The consensus estimate for Tyson Foods’ current fiscal-year sales and earnings indicates growth of about 2% and 13.6%, respectively, from the prior-year reported levels.
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