Earnings Review and Free Research Report: McCormick’s Sales Increased 4.8%; Adjusted EPS Jumped 9.3%
LONDON, UK / ACCESSWIRE / July 12, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on McCormick & Co., Inc. (NYSE: MKC), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=MKC, following the Company's announcement of its financial results for the second quarter fiscal 2017 on June 29, 2017. The spices and seasonings Company outperformed top- and bottom-line expectations. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:
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Earnings Reviewed
For the three months ended May 31, 2017, McCormick's net sales increased 4.8% to $1.11 billion compared to $1.06 billion in Q2 FY16. Base business growth, new products, and acquisitions, were the three drivers of sales growth. During the reported quarter, consumer segment's sales were up 4% and industrial segment grew at 12% in constant currency from Q2 FY16. The Company's revenue numbers surpassed analysts' expectations of $1.10 billion.
McCormick's operating income increased 6% to $132.6 million in Q2 FY17 from $125.0 million in Q2 FY16. The adjusted operating income increased 9% in constant currency attributable to higher sales and savings from Comprehensive Continuous Improvement program (CCI). The increase is in-line with the Company's expectations of 9%-11% for fiscal 2017.
For the reported quarter, the Company's adjusted operating margin expanded 20 basis points from the same quarter last year. Gross margin for Q2 FY17 decreased 80 basis points to 39.9% of sales from 40.7% in Q2 FY16. The decrease is reflected by the unfavorable impact of currency exchange rates and the timing of some pricing actions.
McCormick & Co.'s SG&A for the reported quarter was 27.6% of sales, down 100 basis points from Q2 FY16 due to leverage from sales growth and CCI-led savings. The income tax rate for Q2 FY17 decreased 10 basis points to 23.0% from 23.1% in Q2 FY16.
McCormick's adjusted net income increased 7.2% to $103.4 million in Q2 FY17 from $96.5 million in Q2 FY16. The adjusted earnings per share increased 9.3% to $0.82 for Q2 FY17 compared to $0.75 for Q2 FY16. The adjusted earnings per share for Q2 FY17 include the unfavorable impact of foreign currency exchange rate. The increase was due to growth in adjusted operating income and higher income from unconsolidated operations. The Company's earnings numbers surpassed Wall Street's expectations of $0.77 per share.
Balance Sheet
As on May 31, 2017, McCormick & Co.'s cash and cash equivalents was $130.0 million compared to $ 131.5 million in Q2 FY16. For the reported quarter cash flow from operations decreased 16.9% to $177.0 million from $213.0 million in the same quarter last year. During the quarter, the Company distributed $253 million of cash through dividends and share repurchases and used $66.0 million for capital expenditures.
On June 27, 2017, McCormick's Board of Directors declared a quarterly dividend of $0.47 per share on its common stocks payable July 24, 2017, to shareholders of record on July 10, 2017. McCormick's current annualized dividend rate of $1.88 per share represents an increase of 9% over the annual dividend of $1.72 per share paid in FY16. This is the 93rd year of consecutive dividend payments by the Company.
Outlook
For FY17, McCormick & Co. is forecasting sales to increase in the range of 5%-7% in constant currency. The Company expects the net sales growth rate of 1%, down from the original estimate of 2% due to the impact of foreign currency exchange rates on sales and the impact of special charges related to the organization and streamlining actions underway.
For the fiscal year 2017, the Company expects capital expenditure in the range of $170.0 million-$190.0 million and adjusted earnings per share are expected to be in the range of $4.05-$4.13.
Stock Performance
On Tuesday, July 11, 2017, the stock closed the trading session at $96.25, rising 1.35% from its previous closing price of $94.97. A total volume of 1.26 million shares has exchanged hands, which was higher than the 3-month average volume of 575.75 thousand shares. McCormick's stock price advanced 6.78% in the previous six months. Furthermore, since the start of the year, shares of the Company have gained 3.13%. The stock is trading at a PE ratio of 25.58 and has a dividend yield of 1.95%. At Tuesday's closing price, the stock's net capitalization stands at $12.16 billion.
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