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McCormick's (MKC) Q4 Earnings Beat Estimates, Sales Up Y/Y

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McCormick & Company, Incorporated MKC posted fourth-quarter fiscal 2021 results, with the top and the bottom line increasing year over year. The company’s earnings and sales surpassed the Zacks Consensus Estimate. Sales increased year over year owing to strength in the Flavor Solutions and Consumer segments. The company is on track to capitalize on sustained shift to cooking more at home, higher digital engagement, clean and flavorful eating as well as trusted brands.

Quarter in Detail

Adjusted earnings of 84 cents per share rose 6% from 79 cents reported in the year-ago quarter on the back of higher sales. These were somewhat offset by elevated cost inflation. The metric surpassed the Zacks Consensus Estimate of 80 cents per share.

This global leader of flavors and spices generated sales of $1,730.3 million, up 11% year over year. This includes a favorable impact from currency translation of 1%. Sales from Cholula (acquired in November 2020) and FONA (acquired in December 2020) contributed 4% to the upside. Strength in the company’s Flavor Solutions and Consumer segments drove growth on the back of increased volume and pricing, new products as well as buyouts. On a constant-currency (cc) basis, sales were up 10%. The topline surpassed the Zacks Consensus Estimate of $1,700.9 million.

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

The Zacks Rank #4 (Sell) company’s gross profit margin contracted 180 basis points to 40.6% thanks to increased cost inflation. These were somewhat countered by cost savings from the Comprehensive Continuous Improvement (CCI) program and favorable pricing.

Operating income was $276 million, up from $275 million reported in the year-ago quarter.

Segment Details

Consumer: Sales went up 10% (up 9% in cc) to $1,123.6 million. This includes 2% growth from the Cholula buyout. Sales in the Americas rose 13%. Consumer sales in Europe, Middle East and Africa (EMEA) fell 5% due to the lapping of a spike in demand witnessed in the year-ago quarter. Consumer sales in the Asia/Pacific market increased 16% (up 11% at cc) on the back of favorable demand for products related to away-from-home consumption. Increased sales for cooking-at-home products in the region were an upside.

Flavor Solutions: Sales in the segment increased 14% (up 12% at cc) to $606.7 million.This includes 7% growth from the FONA and Cholula buyouts. Sales in the Americas increased 14%, while the metric moved up 19% in the EMEA region. Sales in the Asia-Pacific region rose 4%, driven by higher growth from quick-service restaurants.

Financial Update

McCormick exited the quarter with cash and cash equivalents of $351.7 million, long-term debt of $3,973.3 million and total shareholders’ equity of $4,425.5 million. For the 12 months ended Nov 30, 2021, net cash provided by operating activities amounted to $828.3 million.

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Fiscal 2022 Outlook

The company expects to achieve sales growth of 3-5% (up 4-6% at cc) year over year. Management anticipates sales to be led by new products, brand marketing, category management as well as differentiated customer engagement. Further, McCormick’s pricing actions and cost savings are likely to offset projected inflationary pressures.

Adjusted operating income is expected to increase in the band of 7-9% (up 8-10% at cc). Adjusted earnings per share (EPS) are expected in the range of $3.17-$3.22. The company had reported an adjusted EPS of $3.05 in fiscal 2021. The earnings growth reflects solid operating growth, partially offset by a 3% headwind from a projected increase in the estimated adjusted effective tax rate.

McCormick’s shares have increased 13.2% in the past three months compared with the industry’s growth of 2.6%.

Hot Consumer Staples Bets

Some better-ranked stocks are Medifast, Inc. MED, United Natural Foods UNFI and Flower Foods FLO.

United Natural Foods, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, sports a Zacks Rank #1 (Strong Buy). Shares of UNFI have declined 14.3% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for United Natural Foods’ current financial year EPS and sales suggests growth of 8.8% and 5.1%, respectively, from the year-ago reported number. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

Medifast, the manufacturer and distributor of weight loss, weight management, healthy living products, and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). Shares of Medifast have declined 4.1% in the past three months.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of about 63% and 49.3%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.

Flower Foods, the producer of packaged bakery foods in the United States, currently carries a Zacks Rank #2. Shares of FLO have gained 12.4% in the past three months.

The Zacks Consensus Estimate for Flower Foods’ 2022 sales suggests growth of 1.9% from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of 15.4%, on average.


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