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Will McCormick's (MKC) Savings Efforts Boost Q3 Earnings?

Zacks Equity Research

McCormick & Company, Incorporated MKC is slated to release third-quarter fiscal 2019 results on Oct 1. This provider of spices, flavors and specialty food items has a record of mixed bottom-line surprises in the trailing four quarters. In the last reported quarter, earnings surpassed the Zacks Consensus Estimate by 6.4%. Let’s see what’s in store for the company in the upcoming quarterly announcement.

Factors Likely to Impact in Q3

McCormick boasts a rich brand portfolio that has strengthened its base business. It is also focused on bolstering footing in the food space through new launches. In fact, the company’s new products are gaining strong retail acceptance that was witnessed in the first and the second quarter of fiscal 2019. Markedly, new product launches are boosting the company’s performance across some key market locations. Health and wellness also continue to drive the company’s innovation agenda. The company adheres to well-chalked marketing and distribution strategies to improve brand performances. In this context, it has been raising spending on digital marketing. Such upsides are likely to add sheen to McCormick’s performance in the to-be-reported quarter.

Additionally, McCormick focuses on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (CCI) program. Apart from supporting bottom-line growth, CCI savings are being utilized to increase investments that are generating higher sales. Management expects such efforts to generate cost savings worth $110 million in fiscal 2019, which boosts expectations for the third quarter.    

Although the aforementioned aspects are encouraging, there are certain headwinds that are likely to exert pressure on the upcoming quarterly results. In this respect, currency headwinds are a concern. Management expects currency movements to have an adverse impact on performance in fiscal 2019, which raises concerns for the upcoming quarterly results.

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


How are Estimates Faring?

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.29, which suggests an improvement of 0.8% from the year-ago quarter’s level. The current estimate has been stable in the past 30 days.

Further, the consensus mark for revenues is pegged at $1,336 million, calling for a decline of approximately 0.6% from the year-ago quarter’s figure.

What Does the Zacks Model Unveil?

Our proven model doesn’t show that McCormick is likely to beat bottom-line estimates in the to-be-reported quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although McCormick has a Zacks Rank #3, its Earnings ESP of 0.00% makes us apprehensive about an earnings beat.  

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

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

Estee Lauder EL has an Earnings ESP of +1.44% and a Zacks Rank of 2.

Hershey HSY, a Zacks #2 Ranked company, has an Earnings ESP of +0.25%.

Conagra CAG has an Earnings ESP of +2.04% and a Zacks Rank of 3.

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McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
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