McCormick & Co. Inc. (MKC) is set to report third-quarter 2014 results before the opening bell on Oct 2. Last quarter, this global leader in spices and flavors posted a positive surprise of 3.23%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Currency headwinds, higher input costs and weakness in the Americas create overhangs for McCormick.
The company has been witnessing a slowdown in the Americas region in both its Consumer and Industrial segments. In the Consumer segment, continued competitive pressure is hurting sales while in the Industrial segment, ongoing weakness in demand from quick service restaurants is hurting revenues. In fact, McCormick is facing a slowdown in demand from quick service restaurants over the last few quarters due to lower restaurant traffic. A difficult retail environment in markets like U.K. also hurt volumes in the previous quarter.
We are optimistic on the consumer business segment in the third quarter as management has taken appropriate actions to address the competitive environment in the Americas, which includes innovation and increased brand marketing support. However, we do not expect much improvement in the industrial business segment over the near term.
Nevertheless, we expect cost savings to boost profits in the coming quarter. The company also expects its third quarter sales to benefit from the acquisition of the Chinese broth maker Wuhan Asia-Pacific Condiments Co. Ltd. in May 2013, as it had been adding to the revenues in the past quarters.
Earnings Whispers?
Our proven model does not conclusively show that McCormick is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP:The ESP for McCormick is 0.00% as both the Zacks Consensus Estimate and Most Accurate Estimate stand at 81 cents per share.
Zacks Rank: McCormick’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Hain Celestial Group Inc. (HAIN), with an Earnings ESP of +1.54% and a Zacks Rank #1 (Strong Buy)
Pinnacle Foods Inc. (PF), with an Earnings ESP of +2.44% and a Zacks Rank #2 (Buy).
Keurig Green Mountain Inc. (GMCR), with an Earnings ESP of +10.26% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment