McCormick & Company (MKC) to Post Q3 Earnings: Things to Note

McCormick & Company, Incorporated MKC is likely to register top-line growth from the year-ago fiscal quarter’s reading when it reports third-quarter fiscal 2022 earnings on Oct 6. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,599 million, suggesting a rise of 2.7% from the prior-year fiscal quarter’s reported figure.

The Zacks Consensus Estimate for quarterly earnings has declined 22.7% in the past 30 days to 65 cents per share, indicating a decline of 18.8% from the figure reported in the prior-year fiscal quarter. The food company has a trailing four-quarter negative earnings surprise of 1.2%, on average. MKC delivered a negative earnings surprise of 26.2% in the last reported quarter.

Factors to Consider

McCormick & Company continues benefiting from its product innovation, an important catalyst. Contributions from buyouts like FONA International (concluded in December 2020) and the parent company of Cholula Hot Sauce (November 2020) have been working well for MKC. However, increased cost inflation and supply-chain disruptions are concerns.

McCormick & Company, Incorporated Price, Consensus and EPS Surprise

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

Preliminary Q3 Results & Guidance

McCormick & Company recently stated that third-quarter 2022 sales lagged management’s expectations. While results were fueled by continued strength in the Flavor Solutions segment, the Consumer segment's growth was hampered by the divestiture of the Kitchen Basics business and earlier-than-expected moderation of increased consumption trends. Besides, inflation-led pressure on consumers’ cost of living induced greater-than-expected price elasticity.

McCormick & Company continued to encounter supply-chain hurdles during the fiscal third quarter, with supply recovery for some restricted materials taking a longer-than-anticipated time. Additionally, MKC continued to incur increased costs to cater to high demand in certain parts of the business and witnessed reduced operating leverage in other parts where demand was muted. Escalated supply-chain costs are putting pressure on MKC’s gross margin.

Management lowered its guidance for fiscal 2022, considering the preliminary results for the fiscal third quarter, earlier-than-anticipated moderation of consumption trends, sluggish normalization of supply-chain cost, the impacts from the Kitchen Basics business divestiture (concluded during the fiscal third quarter) and increased currency headwinds. These aspects raise concerns over the quarter to be reported as well.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for McCormick & Company 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, which isn’t the case here.

McCormick & Company Foods has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

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

Kellogg Company K currently has an Earnings ESP of +1.04% and a Zacks Rank #3. K is expected to register top-line growth when it reports third-quarter 2022 numbers. The Zacks Consensus Estimate for Kellogg's quarterly revenues is pegged at $3.8 billion, suggesting growth of around 4% from the prior-year quarter’s reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Kellogg's quarterly earnings has dropped a penny in the past 30 days to 96 cents per share, suggesting a decline of 11.9% from the year-ago quarter’s tally. K delivered an earnings beat of 13.3%, on average, in the trailing four quarters.

Sysco Corporation SYY currently has an Earnings ESP of +0.36% and a Zacks Rank of 3. SYY is likely to register a top and bottom-line improvement when it reports first-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for quarterly EPS of 99 cents suggests a 19.3% improvement from the figure reported in the year-ago fiscal quarter.

The Zacks Consensus Estimate for Sysco’s quarterly revenues is pegged at $18.6 billion, indicating an improvement of 13.1% from the figure reported in the prior-year fiscal quarter. SYY has a trailing four-quarter earnings surprise of 3.6%, on average.

Beyond Meat BYND currently has an Earnings ESP of +9.23% and a Zacks Rank of 3. BYND is likely to register a rise in the top line when it reports third-quarter 2022 results. The Zacks Consensus Estimate for BYND’s quarterly revenues is pegged at $113.3 million, which suggests a 6.4% increase from the figure reported in the prior-year quarter.

The consensus mark for Beyond Meat’s bottom line has improved a penny in the past 30 days to a loss of $1.10 per share. A loss of 87 cents was reported in the year-ago quarter.

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