McCormick's stock gains as spice maker benefits from consumers eating at home more

By Steve Gelsi

Net income climbs 19% as company refocuses on more profitable products

McCormick & Co.'s stock was rallying by more than 10% on Tuesday after the spice maker's first-quarter profit and revenue topped FactSet consensus estimates as consumers cooked and ate meals at home more often.

The stock traded at $77.36 in midday trades to reach its highest levels since September, while also picking up at least one analyst rating upgrade to "buy."

The spice maker said it managed to raise prices while streamlining its product line to focus on more profitable offerings, as inflation continues to steer consumers' choices about eating in restaurants.

"Budgets are stretched, resulting in choiceful spending decisions, a trend that is continuing from the fourth quarter," Chief Executive Brendan Foley said on the company's call with analysts. "In the first quarter, with higher inflation in the food-service channel and slowing retail food prices, we broadly saw a shift from food away from home to food at home consumption in our major markets."

McCormick (MKC) said its net income for the three months ending Feb. 29 rose 19% to $166 million, or 62 cents a share, from $139.1 million, or 52 cents a share, in the year-ago quarter.

Adjusted first-quarter earnings of 63 cents a share beat the analyst estimate of 58 cents a share by a nickel.

First-quarter revenue rose to $1.6 billion from $1.57 billion in the year-ago quarter, beating the FactSet consensus estimate of $1.55 billion.

Looking ahead, McCormick expects an adjusted 2024 profit of $2.80 to $2.85 per share, compared with the analyst projection of $2.82 per share.

"We are pleased with the momentum we are seeing in the business and continue to expect improved volume performance, which will build throughout the year," Foley said in a statement.

Sales to consumers in the Americas were about flat with the year-ago quarter, as pricing actions were offset by a 3% drop in volume and product mix.

The volume decline was related to the discontinuation of less profitable products to drive margin improvement in prepared food.

CFRA analyst Arun Sundaram upgraded McCormick to buy from hold and lifted the stock's 12-month target price by $12 to $85 a share.

"MKC saw a sequential improvement in volume sales...which we expect will continue this year, especially if MKC regains some of the lost distribution it experienced over the last few years," Sundaram said in a research note. "MKC is also investing in marketing and innovation and looking to narrow price gaps to store brands."

Prior to Tuesday's trading, McCormick's stock had risen 2.2% in 2024, compared with a 9.4% rise by the S&P 500 SPX.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-26-24 1230ET

Copyright (c) 2024 Dow Jones & Company, Inc.