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McCormick (MKC) Queued for Q1 Earnings: Factors to Watch

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Zacks Equity Research
·5 min read
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McCormick & Company, Incorporated MKC is likely to witness increases in the top and bottom lines, when it reports first-quarter fiscal 2021 numbers on Mar 30. The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at 57 cents per share, which indicates a rise of 5.6% from the figure reported in the prior-year period. This manufacturer, distributor and marketer of spices, seasoning mixes, condiments and other flavorful products has a trailing four-quarter earnings surprise of 7.4%, on average.

The Zacks Consensus Estimate for revenues is pegged at $1,385 million, suggesting growth of 14.3% from the prior-year quarter’s reported figure.

Key Factors to Note

The company is benefiting from high demand stemming from the coronavirus-led higher at-home consumption. A sustained shift in consumer behavior toward increased cook and eat at-home amid the coronavirus outbreak fueled demand in the Consumer segment in the last reported quarter. Moreover, increased sales to packaged food companies drove growth in the Flavor Solutions segment.

McCormick & Company, Incorporated Price, Consensus and EPS Surprise

McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated Price, Consensus and EPS Surprise

McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote

Additionally, the company’s focus on enhancing the portfolio through innovation and acquisitions has been yielding results. Aided by a sturdy brand image, McCormick enjoys strong retail acceptance for its new products. During 2020, 7% of McCormick’s overall sales were from products launched in the last three years. Moreover, the company’s solid product pipeline for 2021 is encouraging. In the context of acquisitions, McCormick recently bought a 100% stake in FONA International, LLC and some of its affiliates. Further, in December 2020, the company completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. The buyout of Cholula accelerates the company’s growth potential across the condiment platform and widens the product portfolio in the hot sauce category.

Notably, management’s guidance for fiscal 2021 indicates top and bottom-line growth. Growth is expected to be organic in the segments, backed by new products, brand marketing, category management as well as differentiated customer engagement. Also, the growth projection takes into account additional impacts of the Cholula and FONA buyouts. Moreover, the company, on its fourth-quarter fiscal 2020 earnings call, said that it expects at-home consumption trends to remain favorable owing to the ongoing pandemic. Also, it expects to see a gradual rebound in the demand from restaurant and other foodservice customers. These factors also bode well for the quarter under review.

However, McCormick has been seeing high costs related to coronavirus. In the last reported quarter, coronavirus-induced expenses, increased employee benefit expenses and higher planned brand marketing investments weighed on its adjusted operating income. In fact, management expects to incur pandemic-related costs of nearly $60 million during fiscal 2021, majorly due to third-party manufacturing expenses. That being said, the company’s focus on cost savings and productivity enhancement through its Comprehensive Continuous Improvement (CCI) program is noteworthy. McCormick achieved cost savings of $113 million in fiscal 2020, courtesy of the CCI program. Further, the company expects to achieve CCI-led cost savings of nearly $110 million in fiscal 2021.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for McCormick this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

McCormick currently has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Hillenbrand HI has an Earnings ESP of +2.73% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Estee Lauder Companies EL has an Earnings ESP of +15.26% and a Zacks Rank #2.

Philip Morris PM has an Earnings ESP of +0.36% and a Zacks Rank #3.

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