雅虎香港財經 McCormick (MKC) Q2 Earnings Top Estimates, Volumes Down
McCormick & Company, Incorporated MKC reported second-quarter fiscal 2024 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Quarterly earnings increased year over year. However, sales declined in the quarter as volume growth in the Consumer segment was countered by volume declines in Flavor Solutions. The company experienced reduced demand from certain quick-service restaurants and packaged food customers within Flavor Solutions.
MKC’s commitment to achieving long-term objectives is evident from its proven track record, wide-reaching and competitive global portfolio, focus on high-growth, profitable areas, alignment with evolving consumer preferences and a distinctive heat platform. Management continues to prioritize investments in key areas and growth drivers, like brand promotion, product and packaging innovation, category management and proprietary technology. The company’s cost-saving programs position it well to support investments and drive operating margin growth.
Management is encouraged by its positive business momentum, which is expected to strengthen throughout the year. Management reaffirmed its fiscal 2024 outlook.
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Quarter in Detail
Adjusted earnings of 69 cents per share increased from 60 cents reported in the year-ago quarter. The metric came above the Zacks Consensus Estimate of 59 cents per share. The year-over-year upside can be attributed to the timing of a specific tax benefit and increased income from unconsolidated operations, driven by robust performance from McCormick de Mexico, the company's largest joint venture.
This global leader in flavor generated sales of $1,643.2 million, down 1% year over year, including minimum impact from currency movements. The downtick reflects the company’s strategic decision to divest its canning business. It also accounts for a 1% reduction in volume due to reduced customer demand and the timing of customer activities within the Flavor Solutions segment, which outweighed volume growth in the Consumer segment. The top line exceeded the Zacks Consensus Estimate of $1,626.2 million.
McCormick’s gross profit margin expanded 60 basis points. The upside can be attributed to cost savings from the Comprehensive Continuous Improvement (CCI) program.
Selling, general and administrative (SG&A) expenses escalated year over year due to elevated brand marketing, partly offset by cost savings from the abovementioned program.
At constant currency (cc), the adjusted operating income was flat, reflecting gross margin expansion offset by increased SG&A expenses.
Segment Details
Consumer: Sales dropped 1% to $904.5 million, with a negligible impact on currency movements. Sales were hurt by a 1% decline from pricing actions, somewhat offset by modest volume growth. Substantial volume growth in critical categories was tempered by declines in volume within the Asia-Pacific region (APAC), primarily due to the economic conditions in China, and declines in prepared food categories like Frozen and Asian in the Americas. Sales fell 2% year over year in the Americas while moving up 5% in the EMEA region. Segment sales tumbled 5% in the Asia/Pacific (APAC).
Flavor Solutions: Sales in the segment inched down 1% to $738.7 million with negligible impact on currency movements. The decline can be attributed to a 1% rise in pricing, offset by a 2% decrease in volume and product mix, along with its strategic move to sell off its canning business. Flavor Solutions’ sales in the Americas remained flat. Flavor Solutions’ sales in the EMEA fell by 7%. Sales in the APAC market also ascended 6% year over year.
Financial Update
McCormick exited the quarter with cash and cash equivalents of $166.3 million, long-term debt of $3,325.8 million and total shareholders’ equity of $5,354.2 million. Through the second quarter, net cash provided by operating activities was $301.5 million.
Fiscal 2024 Guidance
For the fiscal 2024, McCormick is focused on strengthening its volume trends and prioritizing investments to fuel profits. The company’s CCI and Global Operating Effectiveness (GOE) programs are driving growth investments and operating margin expansion. Management anticipates currency movements to negatively impact sales, adjusted operating income and adjusted earnings per share (EPS) by nearly 1%.
For 2024, management expects sales to range between a 2% decline to flat year over year. At cc, sales are likely to be between a 1% decline and 1% growth. Management anticipates witnessing a favorable impact of pricing actions undertaken in the prior year. Volume trends are likely to improve and revert to growth due to solid brands and targeted investments. However, its decision to discontinue the low-margin business and sell the canning business is likely to put some pressure on volume during 2024.
Management expects 2024 operating income to grow 8-10%. Adjusted operating income is likely to grow 3-5% (up 4-6% at cc) due to the gross margin expansion, somewhat offset by a major rise in brand marketing investments.
Management envisions 2024 adjusted EPS in the band of $2.80-$2.85, which suggests a 4-6% increase from the year-ago period’s figure and a 5-7% increase at cc. On a GAAP basis, McCormick projects 2024 earnings in the range of $2.76- $2.81 per share compared with the year-ago period figure of $2.52.
Share Performance
This Zacks Rank #4 (Sell) stock has dropped 11% in the past three months compared with the industry’s decline of 7.5%.
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