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Why McCormick Stock Gained 11% in March

By Demitri Kalogeropoulos – Apr 3, 2019 at 1:31PM

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Sales gains sped up in the fiscal first quarter.

What happened

Consumer packaged foods specialist McCormick (MKC -1.39%) outpaced the market last month by rising 11% compared to a 1.8% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally put the spice giant closer to market-beating territory in 2019, but its 8% increase trails the 14% spike in the broader market. McCormick is up significantly over wider time frames, up 45% in the past full year.

A range of spices laid out on a table.

Image source: Getty Images.

So what

Investors were happy to hear in late March that McCormick's sales growth sped back up to a 4% rate after slowing to 2% in the prior quarter. The latest results imply healthy demand for the company's core products, and rising profit margins reflect a continued shift toward innovative release and its newly acquired condiment and sauce franchises.

Now what

CEO Lawrence Kurzius and his team predict that McCormick's sales gains will land between 3% and 5% this year to modestly trail their long-term target of between 4% and 6%. Operating margin will continue expanding, though, with earnings set to rise by about 10%. By 2020, then, the company should be in position to resume its stock repurchase spending after having paid down a significant portion of the debt it took on to fund its $4 billion purchase of the French's and Frank's business.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.

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