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Stockchase Insights McCormick & Co MKC-N HOLD Nov 04, 2024

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

MKC has a market cap of $21B, a yield of 2.2%, historically low to mid-single digit sales and earnings growth rates, and forward earnings margin estimates are quite positive. Its balance sheet is strong, free cash flows are healthy, and its debt levels have been coming down over the years. Over the past 20 years, it has a roughly 10% total return CAGR, and while it has largely been flat over the past several years, we feel that in the coming years it can help an investors' portfolio with downside protection. We would be comfortable holding, or slowly averaging into MKC here.
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BUY

As the economy reopened, shares slid, but shares stabilized last month as the market became volatile. They reported last week some hot sales, but management cut their full-year earnings forecast because of supply chain issues and higher transportation and packaging costs. If these issues can be solved, then MKC would be a terrific buy.

BUY

They report Wednesday. He likes Mc's spice business. If there's a recession, families will buy their spices.

DON'T BUY

Usually it thrives during a slowdown. Their June report slashed full-year guidance, as consumer goods struggle in Europe and Asia. Also, MKF raised prices and consumers didn't bite. Management still needs to get its house in order; they has slashed their full-year-forecast, forecasting $0.65 EPS vs. $0.83 by Wall Street. Full-year, the company projects 0 to -2% sales growth, down from before. Are still struggling from the supply chain.

COMMENT

It reports Thursday. They pre-announced a nasty set of numbers. The actual numbers may reinforce those numbers. He thinks it's a good company though.

DON'T BUY

They report Tuesday. A quality company that's having a tough time dealing with inflation. Some companies like Hershey's and General Mills have been adept pasisng on costs to consumers. Maybe MKC can, but they haven't recently which hasn't inspired confidence.

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TOP PICK

McCormick & company, incorporated (nyse: mkc) is a global leader in flavor and one of the most respected and familiar names in the industry. in business for more than 125 years, mccormick manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the entire food industry—retail outlets, food manufacturers and food service businesses. the mccormick name represents a trusted source of flavor in millions of kitchens around the globe—in homes and in restaurants.

BUY

Yesterday, they reported mixed numbers: a modest earnings beat, softer than expected sales and alight full-year forecast. But management's plan is credible to boost volume growth in 2025 without sacrificing margins.

BUY

It reports Tuesday. They've been putting up big numbers. Also, during recession, people diner out less and cook at home more, so they sell more spices.

DON'T BUY

They report Tuesday. It still trades at a premium multiple when the packaged goods sector has fallen out of favour. Is -10% this year and well off its highs. Spices are a great trade-down for consumers wanting to save money in food. This could bounce, but he doesn't trust this sector. Food is a tough business.

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