McCormick & Company, Incorporated MKC looks promising supported by its portfolio, robust initiatives and impressive earnings history.
Shares of this Zacks Rank #2 (Buy) company have rallied 12.9% year to date, outperforming the Zacks categorized Food–Miscellaneous/Diversified industry’s gain of 1.9%. Also, its long-term earnings growth rate of 8.8% looks encouraging.
Let’s take a Deep Look
Armed with a robust brand portfolio, McCormick regularly enhances its products through innovation in order to remain competitive and tap the rising demand for new flavors, spices and herbs. Moreover, the company continues to improve its brands through increased brand marketing to further drive sales.
Evidently, since 2011, McCormick has increased its spending on digital marketing in order to drive brands’ growth. In fact, management expects to continue improving its portfolio of spices, and is banking on digital marketing to build consumer awareness and boost volume.
Alongside, the company has also been strategically enhancing its footprint through acquisitions in order to grow its spices and seasonings portfolio. Additionally, it is extending its reach in the emerging markets. Evidently, the acquisition of Italy-based Enrico Giotti SpA in Dec 2016 complemented McCormick’s business that involves supplying flavors to packaged food companies and multi-national restaurants.
Also, McCormick’s focus on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program seems encouraging. Going forward, management expects cost savings of roughly $100 million in fiscal 2017 and is on track to achieve its $400 million target by 2019.
Driven by these factors, we note that McCormick’s earnings have outpaced the Zacks Consensus Estimate in 12 of the past 14 quarters. Also, the company’s revenues have outperformed the same in five of the trailing seven quarters. Estimates have remained stable ahead of the company’s second-quarter fiscal 2017 earnings release.
However, higher material costs and unfavorable currency remain major concerns for the company. In 2017, the company expects material cost inflation in mid-single digits and currency headwinds to hurt its bottom line.
We believe the company will efficiently overcome these hurdles, and will drive stellar results in the coming days.
Other Stocks You May Consider
Some other favorably placed stocks in the same industry include SunOpta Inc. STKL, Aramark ARMK and Lamb Weston Holdings, Inc. LW.
SunOpta, with a long-term earnings growth rate of 15% has surged 98.4% in the last one year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aramark carries a Zacks Rank #2 and has posted an average earnings beat of 4.5% in the last four quarters. Also, it has a long-term earnings growth rate of 12.8%.
Lamb Weston, a Zacks Rank #2 stock has jumped 54% in the past year. Also, it has a long-term earnings growth rate of 4.2%.
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