Wall Street has left McCormick (MKC 0.99%) stock out of the market rally that's been going on over the past year. The spice and flavorings giant has enjoyed faster growth since the pandemic put a new premium on home cooking. But investors haven't rewarded the stock for that boost, choosing instead to bet that sales and profit trends will slow right back down as the COVID-19 threat fades.

That pessimistic forecast sets up a potential jump for McCormick shares this week if this well-run company can outperform low expectations. With that in mind, let's look at why investors might be pleasantly surprised by the company's second-quarter report, set for release on Thursday, July 1.

A person cooking at home.

Image source: Getty Images.

Spicy growth for McCormick

Wall Street is bracing for slower growth as McCormick progresses through its fiscal year, but its last earnings report contained several reasons to be more optimistic. Revenue jumped 20% in the fiscal first quarter, beating management's forecast and marking a sharp acceleration over the prior quarter's 5% uptick.

Sure, some of those gains were driven by comparisons to a weak year-ago period and temporary demand boosts due to new COVID-19 outbreaks. Both of those issues likely faded in the second quarter.

Still, McCormick notched robust volumes in its consumer business, higher sales in key markets like China, and extra revenue from newly acquired brands like Cholula hot sauce. All of these factors might contribute to another quarter of faster-than-expected sales growth. Heading into the report, most investors are looking for revenue to rise about 7% to $1.5 billion.

Room for higher prices

Many companies will struggle to pass along higher costs as expenses spike for everything from transportation to raw materials like fresh vegetables. But McCormick likely outperformed its peers here. Prices rose last quarter without crimping demand, and the company offers plenty of premium sauces and condiments that consumers have been choosing when they want to trade up from more traditional spices.

MKC Cash from Operations (Annual) Chart

MKC Cash from Operations (Annual) data by YCharts

These factors helped push gross profit margin up in Q1, and I'll be looking for another profitability increase this quarter. Meanwhile, cash flow should be strong, given that annual operating cash just soared to over $1 billion. Good news on these scores might spark a rally in this underperforming stock.

Looking to fiscal year 2022

Management should have a more concrete outlook to issue on Friday now that half of its fiscal year is over. Heading into the report, that forecast stands at organic sales gains between 7% and 9%. Hitting that target would put McCormick ahead of last year's expansion rate and compares well with the 5% uptick that industry giant PepsiCo is expecting. McCormick CEO Lawrence Kurzius and his team are already calling for nearly 10% earnings growth, too.

Upgrades to either of those targets would be great news for shareholders this week. But this stock is attractive even if McCormick leaves its outlook unchanged. The company is enjoying faster growth, rising profitability, and its best portfolio of spices, condiments, and sauces to date. Those assets, plus a solid track record for cash returns through rising dividends, should keep investors happy to hold this stock well after the pandemic threat fades and at-home cooking trends move back toward normal levels.