Please ensure Javascript is enabled for purposes of website accessibility

Once Again, the Market Likes What McCormick Is Cooking

By Motley Fool Staff - Oct 3, 2017 at 6:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The spice giant had a solid third quarter, and there’s no reason to expect its growth trend to change.

In this segment of the Motley Fool Money radio show, host Chris Hill, Million Dollar Portfolio's Jason Moser and Matt Argersinger, and Aaron Bush of Supernova and Rule Breakers check in on McCormick (MKC -0.70%), the leader in the spice space.

Once again, sales rose 9%, and the company beat on profitability. Though there have been concerns about the balance sheet in the wake of a recent big acquisition, the Fools are fairly enthusiastic about the company's value proposition.

A full transcript follows the video.

This video was recorded on Sept. 29, 2017.

Chris Hill: Solid third quarter report from McCormick, the spice maker. Sales rose 9%, and profits were higher than expected. Pretty good guidance, too, Jason.

Jason Moser: Hey, I just used McCormick spices last night, Chris, as I was making pizza at home for the kids. I mean, I love the value proposition these guys communicate in their products. They basically say that their products represent 10% of the cost of the food that you're eating, yet 90% of the flavor. That right there tells you everything. They really are responsible for pretty much everything that's going on your table, or that stuff you're buying in the restaurant. I think what we've seen in the past few months, there was a lot of concern with McCormick because they announced the acquisition of RB Foods, which was the French's and Frank's properties. They've closed that acquisition and everything has gone through relatively smoothly. There are some downsides in the near term. It has added some debt to the company's balance sheet. It dings their credit rating a little bit. And I think that's where the concern maybe came in. Bigger picture, though, I think the acquisition made perfect sense. It's right in their wheelhouse. I think it helps them gain more of a global presence and lever to that cost structure, which will ultimately help boost margins down the line. You're looking at a market that's going to continue to grow slowly but steadily. Euromonitor projects 5% growth in the space into 2021, and McCormick is always getting a pretty good share of that year-in and year-out. I defy you to look in your pantry at home and not find at least one or two McCormick products in there. So, all in all, a very well-run business, a good track record of growing earnings and dividends. It's one we have on the watch list in MDP. We're really a little bit more concerned with the valuation than anything.

Hill: You've got it on the watch list, so I'm guessing you were hoping for a bad quarter, because the stock bumped up about 5% on this report.

Moser: I'm not going to lie, Chris, I was hoping it would go in the other direction.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McCormick & Company, Incorporated Stock Quote
McCormick & Company, Incorporated
MKC
$82.67 (-0.70%) $0.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.