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Post Earnings Coverage as McCormick's Q1 Bottom-line Beat Expectations

Upcoming AWS Coverage on J&J Snack Foods

LONDON, UK / ACCESSWIRE / April 10, 2017 / Active Wall St. announces its post-earnings coverage on McCormick & Co., Inc. (NYSE: MKC). The Company announced its financial results for the first quarter fiscal 2017 (Q1 FY17) on March 28, 2017. The Sparks, Maryland-based Company reported a 1% y-o-y growth in its net sales and a 2.7 % y-o-y growth in its adjusted diluted EPS. Register with us now for your free membership at:


One of McCormick & Co.'s competitors within the Processed & Packaged Goods space, J&J Snack Foods Corp. (NASDAQ: JJSF), is estimated to report earnings on April 24, 2017. AWS will be initiating a research report on J&J Snack Foods following the release of its next earnings results.

Today, AWS is promoting its earnings coverage on MKC; touching on JJSF. Get our free coverage by signing up to:


Earnings Reviewed

During the three months ended on February 28, 2017, McCormick reported net sales of $1.04 billion compared to $1.03 billion recorded at the end of Q1 FY16. However, the Company's net sales numbers lagged behind market expectations of $1.06 billion. McCormick's top-line grew, as sales increased in both its consumer and industrial segments.

The global leader in spices reported net income of $93.5 million, or $0.74 per diluted share, in Q1 FY17 compared to $93.4 million, or $0.73 per diluted share, in the prior year's same period. During the reported quarter, the Company's net income benefitted from the increase in operating income, which was offset in part by a higher tax rate and the impact of unfavorable currency on income from unconsolidated operation.

McCormick's adjusted net income increased to $96.0 million, or $0.76 per diluted share, in Q1 FY17 from $94.7 million, or $0.74 per diluted share, in the past year's comparable quarter. The Company's adjusted net income for Q1 FY17 beat Wall Street's expectations of $0.75 per diluted share.

Operating Metrics

In the reported quarter, McCormick's gross profit increased to $413.0 million, or 39.6% of net sales, from $405.0 million, or 39.3% of net sales, in the year ago comparable period. The Company's operating income came in at $134.2 million compared to $129.1 million in Q1 FY16. Furthermore, the adjusted operating income for the reported quarter stood at $137.8 million, growing 5.4% y-o-y from $130.7 million in Q1 FY16.

Segment Performance

The Company's Consumer segment's net sales grew 1% y-o-y to $638.6 million in the reported quarter with the operating income also improving from $93.0 million in Q1 FY16 to $95.4 million in Q1 FY17. The consumer sales growth in Americas and Asia/Pacific regions were 2% and 7% y-o-y, respectively, in Q1 FY17; however consumer sales dropped by 7% y-o-y in Europe and Middle East and Africa region (EMEA). Meanwhile, the Company's operating income, excluding special charges grew to $97.9 million in Q1 FY17 from $94.3 million in the last year's comparable quarter.

Industrial segment's sales rose 2% from $396.4 million in Q1 FY16 to $405.1 million in Q1 FY17. The segment's sales were up by 2% y-o-y in the Americas and 7% in Asia/Pacific regions, while it reported a flat sales growth in the EMEA region. The segment's operating income for Q1 FY17 came in at $38.8 million compared to $36.1 million in the prior year's same quarter. Moreover, the segment's operating income, excluding special charges, rose 10% to $39.9 million in Q1 FY17 from $36.4 million in the year-ago comparable period.

Cash Flow & Balance

During Q1 FY17, McCormick's net cash flow, provided by operating activities, declined to $44.3 million from $78.6 million in the year ago corresponding period. At the close of books on February 28, 2017, McCormick had cash and cash equivalents balance of $125.7 million versus $111.8 million at the close of books on February 29, 2016. Additionally, the Company's long-term debt decreased to $803.5 million as on February 28, 2017, from $1.06 billion as on February 29, 2016.

Dividend and Buyback

In a separate press release on March 29, 2017, McCormick's Board of Directors declared quarterly cash dividend of $0.47 per share on its common stocks payable April 24, 2017, to shareholders of record on April 10, 2017. It is the Company's 93rd year of consecutive dividend payments.

During Q1 FY17, McCormick returned $142 million of cash to shareholders through dividends and share repurchases. Furthermore, at the close of Q1 FY17, the Company had $244 million remaining on the current $600 million share repurchase authorization.

Earnings Guidance

McCormick has updated its earnings guidance for full year FY17. The Company expects net sales for FY17 to grow in the range of 3% to 5% y-o-y. The Company's management forecasts FY17 operating income growth to be in the range of 9% to 11% y-o-y with EPS in the range of $3.98 to $4.06. Furthermore, the company reaffirmed forecasted adjusted EPS to be between $4.05 and $4.13 during FY17.

Stock Performance

At the closing bell, on Friday, April 07, 2017, McCormick & Co.'s stock marginally slipped 0.49%, ending the trading session at $99.59. A total volume of 889.42 thousand shares were traded at the end of the day, which was higher than the 3-month average volume of 806.74 thousand shares. In the last three months and previous six months, shares of the Company have advanced 9.47% and 5.60%, respectively. Moreover, the stock gained 7.21% since the start of the year. The Company's shares are trading at a PE ratio of 26.90 and have a dividend yield of 1.89%. At Friday's closing price, the stock's net capitalization stands at $12.49 billion.

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