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Category: Mccormick (MKC)
Date: 29 September 2020 Stock price of McCormick: $189.98 We take a quick look at the 3Q 2020 earnings report of McCormick (MKC). The group has reinstated providing a fiscal outlook for their 2020 fiscal year. The group has also announced a 2-for-1 stock split that will take place towards the end of November 2020
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Lawrence E. Kurzius, Chairman, President and CEO - The last few months have been an extraordinary period and the COVID-19 situation continues to evolve daily. I am incredibly proud of the way McCormick has performed in an unprecedented operating environment. "
More About Mccormick (MKC)
McCormick & Company, Incorporated is a global leader in flavor. With $5.3 billion in annual sales, the company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the entire food industry – retail outlets, food manufacturers and foodservice businesses. Every day, no matter where or what you eat, you can enjoy food flavored by McCormick. McCormick Brings the Joy of Flavor to Life™.
Overview of McCormicks (MKC) 3Q 2020 earnigns report
HUNT VALLEY, Md., Sept. 29, 2020 /PRNewswire/ -- McCormick & Company, Incorporated (NYSE:MKC), a global leader in flavor, today reported financial results for the third quarter ended August 31, 2020.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman, President and CEO, stated, "The last few months have been an extraordinary period and the COVID-19 situation continues to evolve daily. I am incredibly proud of the way McCormick has performed in an unprecedented operating environment.
"Our results for the third quarter continued to be significantly impacted by the sustained consumer preference for cooking more at home. Our outstanding consumer segment growth was driven by the substantial increase in demand reflecting the change in consumer behavior and fueled by our brand marketing, strong consumer digital connections and new products. In our flavor solutions segment, lower demand from our restaurant and other foodservice customers improved sequentially from the second quarter and were almost fully offset by increased sales to packaged food companies. Taken together, these impacts continue to demonstrate the strength and diversity of our offering.
"Our third quarter and year to date results speak to the value of our products and to our capabilities as a company. Year to date we have delivered robust sales, operating profit, and earnings per share growth, as well as significant cash flow, all driven by the engagement of our employees and the successful execution of our strategies. Our updated 2020 outlook reflects the strength of these year-to-date results and our confidence in the sustainability of higher at home consumption trends. We expect to deliver strong sales growth and underlying operating performance while ensuring the health and safety of our employees making investments to meet the growth we expect in 2021, recognizing the exceptional performance of our people throughout the COVID-19 crisis and supporting our communities through relief efforts. As we enter the fourth quarter, we believe the continued momentum we are seeing in our business positions us well to achieve the high-end of our full year sales guidance, recognizing there remains a degree of uncertainty in the operating environment. We have a strong foundation and are focused on the long-term goals, strategies and values that have made us so successful.
"I am pleased to announce a 2 for 1 stock split reflecting our sustained positive performance and outlook for continued growth. The company last completed a stock split in April 2002.
"McCormick is a global leader in flavor. We are differentiated with a broad and advantaged global flavor portfolio which continues to drive growth and position us to fully meet the demand for flavor around the world. We deliver flavor across all markets and through all channels, while responding readily to changes in the ever-evolving food and beverage industry, as well as in the global environment, with new ideas, innovation and purpose. We are continuing to capitalize on the global and growing consumer interests in healthy, flavorful cooking, heritage brands and digital engagement. These long-term trends have not only remained intact during this crisis, they have accelerated. Our focus on long-term sustainable growth and strengthening our organization is the foundation of our future. We are confident we will continue to successfully navigate through the current volatility, deliver another strong year of profitable growth in 2020 and continue on our long-term growth trajectory.
"I want to recognize McCormick employees around the world as the collective power of our people drives our momentum and our success. With our vision to stand together for flavor and our relentless focus on growth, performance, and people, we are confident our strategies will enable us to become even better positioned to drive future growth and build long-term value for our shareholders."
Fiscal Year 2020 Financial Outlook
McCormick previously withdrew its fiscal 2020 guidance on March 31, 2020. While recognizing the operating environment continues to evolve and there remains a degree of uncertainty about the pace and shape of the COVID-19 recovery, the company believes the shift in consumer demand to at home consumption will continue. The company expects it will drive growth in this dynamic environment as evidenced by its strong year-to-date fiscal 2020 performance and its momentum entering its fourth quarter. With McCormick's increased visibility to the balance of its fiscal year, the company is resuming guidance.
In 2020, the company expects to grow sales compared to 2019 at the upper end of a 4% to 5% range, which in constant currency is a 5% to 6% projected growth rate. This increase consists entirely of organic growth and reflects growth driven by new products, brand marketing and expanded distribution as well the net impact of the consumer shift in demand as a result of COVID-19 and the consumer's sustained preference for cooking at home. Sales growth is also expected to include the impact of pricing at the beginning of the year, which in conjunction with cost savings, is expected to offset an anticipated mid-single digit inflationary pressure.
Operating income in 2020 is expected to grow from 6% to 7% from $958 million of operating income in 2019. The company projects COVID-19 related costs as well as a higher level of incentive compensation consistent with the company's commitment to a pay-for-performance philosophy across the organization will reduce growth in operating income. Special charges of approximately $7 million are currently projected for 2020 that relate to previously announced organization and streamlining actions. Excluding the impact of special charges in 2020 and 2019, adjusted operating income is expected to increase from 4% to 5%, which in constant currency is 5% to 6%, from adjusted operating income of $979 million in 2019.
McCormick projects 2020 earnings per share to be in the range of $5.60 to $5.68 compared to $5.24 of earnings per share in 2019. Excluding an estimated $0.04 impact of special charges in 2020, the company projects 2020 adjusted earnings per share to be in the range of $5.64 to $5.72 which is an expected increase of 5% to 7%, or in constant currency 6% to 8%.
Stock Split
The company announced a 2-for-1 stock split of the company's common stock and common stock non-voting shares. The additional shares will be distributed on November 30, 2020 to stockholders of record as of November 20, 2020. The split will double the number of outstanding common and common non-voting shares. Common and common non-voting shares and per-share data in this press release have not been adjusted for the impact of the split. We expect trading will begin on a split-adjusted basis on December 1, 2020.
- Sales rose 8% in the third quarter from the year-ago period. In constant currency, the company grew sales 9% with significant consumer segment growth partially offset by a low single digit sales decline in the flavor solutions segment.
- Operating income was $273 million in the third quarter compared to $254 million in the year-ago period, an increase of 8%. Adjusted operating income was also $273 million, an increase of 5% from $261 million in the third quarter of 2019, and a 6% increase in constant currency.
- Earnings per share was $1.53 in the third quarter as compared to $1.43 in the year-ago period. Adjusted earnings per share rose 5% to $1.53 from $1.46 in the year-ago period.
- For fiscal year 2020, McCormick resumed its guidance. The company's financial outlook reflects strong business performance driven by expected sales growth at the upper end of a 4% to 5% range, which in constant currency is 5% to 6%.
- McCormick's Board of Directors approved a 2-for-1 stock split of the company's common and common non-voting shares for shareholders of record on November 20, 2020.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman, President and CEO, stated, "The last few months have been an extraordinary period and the COVID-19 situation continues to evolve daily. I am incredibly proud of the way McCormick has performed in an unprecedented operating environment.
"Our results for the third quarter continued to be significantly impacted by the sustained consumer preference for cooking more at home. Our outstanding consumer segment growth was driven by the substantial increase in demand reflecting the change in consumer behavior and fueled by our brand marketing, strong consumer digital connections and new products. In our flavor solutions segment, lower demand from our restaurant and other foodservice customers improved sequentially from the second quarter and were almost fully offset by increased sales to packaged food companies. Taken together, these impacts continue to demonstrate the strength and diversity of our offering.
"Our third quarter and year to date results speak to the value of our products and to our capabilities as a company. Year to date we have delivered robust sales, operating profit, and earnings per share growth, as well as significant cash flow, all driven by the engagement of our employees and the successful execution of our strategies. Our updated 2020 outlook reflects the strength of these year-to-date results and our confidence in the sustainability of higher at home consumption trends. We expect to deliver strong sales growth and underlying operating performance while ensuring the health and safety of our employees making investments to meet the growth we expect in 2021, recognizing the exceptional performance of our people throughout the COVID-19 crisis and supporting our communities through relief efforts. As we enter the fourth quarter, we believe the continued momentum we are seeing in our business positions us well to achieve the high-end of our full year sales guidance, recognizing there remains a degree of uncertainty in the operating environment. We have a strong foundation and are focused on the long-term goals, strategies and values that have made us so successful.
"I am pleased to announce a 2 for 1 stock split reflecting our sustained positive performance and outlook for continued growth. The company last completed a stock split in April 2002.
"McCormick is a global leader in flavor. We are differentiated with a broad and advantaged global flavor portfolio which continues to drive growth and position us to fully meet the demand for flavor around the world. We deliver flavor across all markets and through all channels, while responding readily to changes in the ever-evolving food and beverage industry, as well as in the global environment, with new ideas, innovation and purpose. We are continuing to capitalize on the global and growing consumer interests in healthy, flavorful cooking, heritage brands and digital engagement. These long-term trends have not only remained intact during this crisis, they have accelerated. Our focus on long-term sustainable growth and strengthening our organization is the foundation of our future. We are confident we will continue to successfully navigate through the current volatility, deliver another strong year of profitable growth in 2020 and continue on our long-term growth trajectory.
"I want to recognize McCormick employees around the world as the collective power of our people drives our momentum and our success. With our vision to stand together for flavor and our relentless focus on growth, performance, and people, we are confident our strategies will enable us to become even better positioned to drive future growth and build long-term value for our shareholders."
Fiscal Year 2020 Financial Outlook
McCormick previously withdrew its fiscal 2020 guidance on March 31, 2020. While recognizing the operating environment continues to evolve and there remains a degree of uncertainty about the pace and shape of the COVID-19 recovery, the company believes the shift in consumer demand to at home consumption will continue. The company expects it will drive growth in this dynamic environment as evidenced by its strong year-to-date fiscal 2020 performance and its momentum entering its fourth quarter. With McCormick's increased visibility to the balance of its fiscal year, the company is resuming guidance.
In 2020, the company expects to grow sales compared to 2019 at the upper end of a 4% to 5% range, which in constant currency is a 5% to 6% projected growth rate. This increase consists entirely of organic growth and reflects growth driven by new products, brand marketing and expanded distribution as well the net impact of the consumer shift in demand as a result of COVID-19 and the consumer's sustained preference for cooking at home. Sales growth is also expected to include the impact of pricing at the beginning of the year, which in conjunction with cost savings, is expected to offset an anticipated mid-single digit inflationary pressure.
Operating income in 2020 is expected to grow from 6% to 7% from $958 million of operating income in 2019. The company projects COVID-19 related costs as well as a higher level of incentive compensation consistent with the company's commitment to a pay-for-performance philosophy across the organization will reduce growth in operating income. Special charges of approximately $7 million are currently projected for 2020 that relate to previously announced organization and streamlining actions. Excluding the impact of special charges in 2020 and 2019, adjusted operating income is expected to increase from 4% to 5%, which in constant currency is 5% to 6%, from adjusted operating income of $979 million in 2019.
McCormick projects 2020 earnings per share to be in the range of $5.60 to $5.68 compared to $5.24 of earnings per share in 2019. Excluding an estimated $0.04 impact of special charges in 2020, the company projects 2020 adjusted earnings per share to be in the range of $5.64 to $5.72 which is an expected increase of 5% to 7%, or in constant currency 6% to 8%.
Stock Split
The company announced a 2-for-1 stock split of the company's common stock and common stock non-voting shares. The additional shares will be distributed on November 30, 2020 to stockholders of record as of November 20, 2020. The split will double the number of outstanding common and common non-voting shares. Common and common non-voting shares and per-share data in this press release have not been adjusted for the impact of the split. We expect trading will begin on a split-adjusted basis on December 1, 2020.
McCormick (MKC) stock vs J.M Smucker (SJM) stock over the last 5 years
The image below shows the stock price history of McCormick (MKC) and J.M Smuckers (SJM) over the last 5 years. While both are active in the condiments and food industry their stock price trends and returns are very different. The summary below shows the stock price performance of these two firms over the last 5 years:
The stock of McCormick has easily outperformed that of J.M Smuckers over the last 5 years.
- McCormick (MKC): 121.9%
- J.M Smuckers (SJM): -16.2%
The stock of McCormick has easily outperformed that of J.M Smuckers over the last 5 years.
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