McCormick (MKC) Tops Q3 Earnings On Acquisitions, Ups View

McCormick & Co. Inc. (MKC - Analyst Report) delivered better-than-expected results in the third quarter of fiscal 2016, where both earnings and revenues beat the Zacks Consensus Estimate. The company has also raised its financial guidance for full year 2016.

Adjusted earnings of $1.03 per share beat the Zacks Consensus Estimate of 95 cents by 8.4%. Moreover, it was 21.1% higher year over year, owing to favorable tax rate and higher operating income. Further, the favorable impact of higher sales and cost savings were offset by an increase in brand marketing and material costs, and currency headwinds.

Revenues and Profits

The global leader in flavors and spices delivered third quarter revenues of $1.091 billion, which marginally beat the Zacks Consensus Estimate by 0.2%. Revenues grew about 3% from the prior-year quarter, driven by acquisitions (Stubbs and Gourmet Garden), which added 2% to the sales increase.

Product innovation, brand marketing support and expanded distribution, as well as pricing actions also led to sales growth, offsetting the negative impact of material costs and currency. Excluding currency headwinds, revenues grew 6%.

The company’s adjusted operating income grew 11.7% to $172 million in the third quarter. On a constant currency basis, it increased 15%, owing to higher sales and cost savings more than offsetting material cost inflation and brand marketing expenses.

MCCORMICK & CO Price, Consensus and EPS Surprise

MCCORMICK & CO Price, Consensus and EPS Surprise | MCCORMICK & CO Quote

Segment Details

Consumer Business: Segment revenues grew 7% on a constant currency basis, driven by acquisition gains, increased volume, better product mix as well as pricing actions. Sales increased on a constant currency basis in all the regions of Americas, Europe, Middle East and Africa (EMEA), and Asia/Pacific. 

On a constant currency basis, adjusted operating income rose 12% driven by the favorable impact of sales growth and cost savings more than offsetting the increase in brand marketing expenses and unfavorable impact of higher material costs.

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