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McCormick & Co Inc Non-Voting MKC

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McCormick Serves Up a Bland End to Fiscal 2020, But Shares Could Cause Indigestion

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Wide-moat McCormick ended the year on a subdued note, posting 4% organic sales growth, flat gross margins (at 42.4%), and a 180-basis-point erosion in adjusted operating margins (to 18.6%). And although the consumer arm (60% of sales) continued to run the house (up 5%), its flavor solutions segment chalked up top-line growth for the first time since the pandemic took hold to the tune of 3% (a material pickup from the 2% decline in the third quarter). We never anticipated the divergence in its segment results would prove sustainable, and although management remains staunch in its belief that in-home cooking will prove a lasting trend, we surmise consumers will eventually yearn to navigate beyond their homes as vaccines become more widely distributed.

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Company Profile

Business Description

In its 130-year history, McCormick has become the leading global manufacturer, marketer, and distributor of spices, herbs, extracts, seasonings, and other flavorings. McCormick's customer base includes top quick-service restaurants, retail grocery chains, and other packaged food manufacturers, with about 40% of sales generated beyond its home turf to include 150 other countries and territories. Beyond its namesake brand, the firm's portfolio includes Old Bay, Zatarain's, Thai Kitchen, Frank's RedHot, French's, and the recently cquired Cholula brand.

24 Schilling Road, Suite 1
Hunt Valley, MD, 21031
T +1 410 771-7301
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Nov 30, 2020
Fiscal Year End Nov 30, 2021
Stock Type Classic Growth
Employees 13,000