The new earnings season is about to begin, but a few laggards are still getting around to reporting their quarterly results. McCormick (MKC +2.28%) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.
McCormick has turned the spice niche into its own personal profit-making machine. But can the company continue to combine the broad-based appeal of its consumer spice operations with its lucrative deals with commercial food preparers? Let's take an early look at what's been happening with McCormick over the past quarter and what we're likely to see in its quarterly report on Tuesday.
Stats on McCormick
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| |
|---|---|
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Analyst EPS Estimate |
$0.56 |
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Change From Year-Ago EPS |
1.8% |
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Revenue Estimate |
$922.7 million |
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Change From Year-Ago Revenue |
1.8% |
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Earnings Beats in Past 4 Quarters |
2 |
Source: Yahoo! Finance.
Will McCormick spice up its report this quarter?
Analysts haven't been all that impressed with McCormick's earnings prospects in the past few months, as they've cut back on their estimates for the most recent quarter by $0.08 per share as part of a broader fiscal 2013 pullback of $0.15 per share. The stock, however, didn't miss a beat, rising more than 15% during the first three months of 2013.
McCormick stands atop the spice industry with its impressive dominance of the U.S. consumer market. The company has used that position to deliver strong returns and steadily rising dividends to investors, with average annual returns of more than 15% over the past 30 years.
But McCormick hasn't been coasting on its success. It has made acquisitions to expand internationally, with an emphasis on growing emerging market sales to make up a fifth of its overall revenue within the next few years. The company has also been introducing new products, having launched 250 new products just last year alone.
One interesting area for expansion in McCormick's product line comes from its Zatarain's brand of boxed rice dishes. Unlike most of its segments, Zatarain's has strong competition in main rival PepsiCo's Rice-a-Roni. But if McCormick can emphasize the spice in its packaged products compared to Rice-a-Roni and other competing products like General Mills and its Hamburger Helper line of accompaniments, then it could manage to succeed in a cutthroat packaged-foods industry.
In its quarterly report, watch closely for McCormick's discussion of profit margins. With food input prices still at elevated levels, understanding better how McCormick is affected by those prices is valuable for assessing the investment in the future. At a lofty 24 times earnings, McCormick isn't a stock you need to jump on right away.
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