A Recipe for Earnings

McCormick (NYSE: MKC  ) is serving up some impressive cooking with four consecutive years of double-digit comparable-earnings growth. That feat seems even more impressive, considering that one of those years was 2008 -- a tough year for the market, to say the least.

Now, the parent company of Zatarain's and Lawry's is reporting an increase in both revenue and earnings compared with its fourth-quarter and full-year results from '08. The company also increased gross margins for the two comparable time periods in fiscal 2009. Let's look at some key comparisons.

Metric

2009 Results

2008 Results

Year-Over-Year Change

Net Sales (Qtr)

$924.5 M

$906.9 M

2%

Net Sales (Full Yr)

$3,192M

$3,177M

0.5%

Adjusted EPS (Qtr)

0.91

0.84

8%

Adjusted EPS (Full Yr)

2.35

2.14

10%

*Adjusted earnings remove non-recurring expenses.Source: McCormick Q4 2009 earnings press release.

Cash from operations for the fiscal year totaled a record $416 million, and the company used its cash flow to reduce debt. In 2010, McCormick plans to further reduce debt possibly make some acquisitions.

McCormick's Comprehensive Continuous Improvement internal initiative has produced $42 million in cost savings, which the spice specialist is using to fund additional marketing efforts that are expected to feed sales increases going forward.

Reports of revenue growth have been rare lately, with even some big food companies putting up reduced-calorie numbers. How does McCormick stack up against some of the competition?

Company

TTM Revenue Growth

Predicted Annual 5-Year Revenue Growth

McCormick

0.5%

10.2%

Heinz (NYSE: HNZ  )

(3.6%)

6.3%

ConAgra (NYSE: CAG  )

1.9%

11.7%

General Mills (NYSE: GIS  )

2.7%

9.7%

Kraft (NYSE: KFT  )

(3.6%)

6.3%

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and author's calculations.

This looks to be a solid company that's executing well. Putting costs on a diet and throwing in an extra helping of revenue is a proven recipe for higher earnings. Blend a dash of dividends and a pinch of cost-cutting, stir in some strong brands and steady revenue growth, and you have a stock that should be on the menu for investors' core holdings.

More on McCormick:

Fool contributor Russ Krull doesn't own shares of any stock mentioned in this article. H.J. Heinz and McCormick are Motley Fool Income Investor picks. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.


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