Did McCormick’s Acquisitions Boost Revenue in Fiscal 1Q16?
McCormick's 1Q16 Earnings: Off to a Good Start in Fiscal 2016?
McCormick’s revenue rose on acquisitions and product innovation
McCormick & Company’s (MKC) revenue increased 2% year-over-year in fiscal 1Q16 to $1.03 billion. Revenue in the comparable quarter in fiscal 2015 was $1.01 billion. As anticipated, the company saw an incremental sales benefit from the three acquisitions completed in 2015.
Revenue contributors
The company earns its revenue through two segments: the Consumer Business and Industrial Business segments. The strong growth in both segments, driven by McCormick’s growth strategy, helped increase sales by 7% in constant-currency terms. This excluded the unfavorable impact of currency translation. We’ll discuss the segments’ results in the next part of this series.
McCormick is improving base business sales with brand marketing. It is also launching differentiated new products, including herb grinders and slow cooker sauces for the consumer segment and snack seasonings for the industrial segment.
What else contributed to revenue?
Let’s break down the 7% rise in constant-currency sales. Acquisitions completed in 2015 had a positive impact of ~3%. Higher volume and product mix, and to some extent the pricing actions that the company took in response to higher material costs, contributed another 4%.
Peers’ revenue growth
McCormick & Company’s competitors in the industry include ConAgra Foods (CAG), Ingredion (INGR), and Kellogg (K). ConAgra Foods and Kellogg saw revenue fall 25% and 11%, respectively, in their last reported quarters, while Ingredion’s revenue rose 3% in its last reported quarter.
To gain diversified exposure to MKC, you can invest in ETFs such as the First Trust Consumer Staples AlphaDEX Fund (FXG) and the iShares U.S. Consumer Goods ETF (IYK), which invest 1.6% and 0.47% of their respective portfolios in MKC.
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