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Bland McCormick & Co Stock May Offer Some Spicy Returns

Just because the financial press ignores MCK stock doesn't mean you should

MKC stock - Bland McCormick & Co Stock May Offer Some Spicy Returns

Source: Blue Genie via Flickr

How ironic is it that spices maker McCormick & Co (NYSE:MKC) has a “bland” stock despite its “zesty” financial performance? Indeed, there is plenty to like about MKC stock besides how it lends itself to bad puns.

McCormick earlier this week reported a solid quarter and gave bullish guidance as it continues to reap the benefits from last year’s $4.2-billion acquisition of the food business of Reckitt Benckiser (RB Foods — the parent of French’s Mustard, Cattleman’s brand and Frank’s RedHot sauce) and its 2016 purchase of Italian flavor company Enrico Giotti for $126 million.

During the quarter, MKC generated double-digit sales, operating profit, and margin and EPS growth. Adjusted earnings were a better-than-expected $1 per share on revenue of $1.24 billion. The company ratcheted up its 2018 sales forecast to $5.46 billion, an increase of 13-15%, and raised its guidance for earnings per share to $4.85-$4.90.

Though 12% of MKC’s 19% sales growth was due to acquisitions, 7% organic growth is not too shabby considering that other names in the food industry, such as Kraft Heinz Co (NASDAQ:KHC), Campbell Soup Company (NYSE:CPB) and Kellogg Company (NYSE:K), are finding growth to be elusive.

MCK’s forecast for $50 million in cost synergies from the RB Foods deal may have been too conservative as it ratchets up marketing spending on French’s Mustard and Frank’s RedHot ahead of the grilling season. French’s and Frank’s should get a nice bump in international markets as well.

Frank’s also had almost no e-commerce presence and we’re building this exciting brand into our e-commerce efforts as well,” said McCormick Chief Executive Lawrence Kurzius during the company’s earnings conference call.

“Reenergizing French’s Mustard category leadership is already underway. We’re launching a new consumer campaign that reinforces French’s preferred flavor being the trusted family favorite and roots as a pure product which we will support with increased working media.”

Bottom Line on MKC Stock

Looking ahead, Wall Street analysts are starting to take a shine to MKC stock. UBS, Citigroup and Credit Suisse recently raised their price targets to $108, $114 and $122, respectively. The company also pays a dividend yielding 1.93%, which is slightly better than the 1.88% average yield of the S&P 500

Unfortunately, MCK earnings aren’t spicy enough to attract the attention of the financial press, which largely ignores its earnings. That’s a pity since MCK stock can add some pep to most portfolios for patient investors.

Article printed from InvestorPlace Media,

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