Stock (Symbol) |
McCormick (MKC) |
Stock Price |
$100 |
Sector |
| Food & Necessities |
Data is as of |
| April 27, 2017 |
Expected to Report |
| Jun 28 |
Company Description |
 MKC Incorporated manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry. MKC has two business segments: consumer and industrial. Under the Consumer segment, its brands in the Americas include McCormick, Lawry’s and Club House. It also markets ethnic brands, such as Zatarain’s, Thai Kitchen and Simply Asia. In Europe, the Middle East and Africa (EMEA), its brands include the Ducros, Schwartz and Kamis brands of spices, herbs and seasonings, and a line of Vahine brand dessert items. In the Asia/Pacific region, it markets products under the McCormick and DaQiao brands In India, its majority-owned joint venture owns and trades under the Kohinoor brand. In the industrial business segment, it offers seasoning blends, spices and herbs, condiments, coating systems and compound flavors to food manufacturers and foodservice customers. Source: Thomson Financial |
Sharek’s Take |
 Shares of McCormick (MKC) aren’t doing much as profit growth has slowed to the low single-digits. Last qtr the company had profit growth and sales growth of just 3%. Estimates are for profits to grow 1%, 6%, 16% and 11% the next 4 qtrs, so growth is slow now but is expected to accelerate later this year. Founded in 1889 by Willoughby McCormick at age 25 from a room in a cellar, McCormick’s first products were root beer extract, flavoring extracts, fruit syrups & juices sold door to door. In the 1890s McCormick went into the spice business when it purchased a spice company and now the company celebrates its 126th year in business. Today, McCormick has 22% of the global spices & herb market in addition to other brands including Zatarain’s (also founded in 1889 in New Orleans), Old Bay Seasoning, Thai Kitchen, Simply Asian, Lawry’s & Adolph’s. New products/brands include Herb Grinders, Cajun Injector, and Gourmet Garden, a leader in chilled herbs. In 2016 company increased is dividend 9% — the 31st consecutive year of increases — and returned more than 2/3rd of cash from operations to shareholders. MCK is in the middle of a slow-growth period, thus the stock isn’t moving much. Management expects 9% to 11% profit growth for 2017 (on a constant currency basis) and analysts estimate 8% profit growth for the year. At 25x earnings the stock is fairly valued here but this is a great buy-and-hold stock with high safety and security for conservative investors. I just don’t see MKC going anywhere for the next 3-6 months. |
One Year Chart |
 Last qtr the company had profit growth and sales growth of just 3%. Sales were up 4% constant currency basis. F/X has been hampering sales growth, but the dollar has been weak recently so that could mean brighter days ahead. Qtrly Estimates for the next 4 qtrs are 1%, 6%, 16% and 13%. So the stock might go up when growth accelerates. MKC pays a dividend of 2% and analysts have an Estimated Long Term Growth Rate of 9% on the stock. |
Fair Value |
 My Fair Value on MKC is 23x earnings, which makes the stock slightly overvalued here. Upside to 2018 isn’t great either. |
Bottom Line |
 McCormick’s is a safe and solid investment for conservative buy-and-hold investors. During the past decade the stock’s grown 10% per year in addition to paying a dividend of 2% per year. That’s good considering the high safety factor. Overall McCormick should continue to churn its way higher, but I don’t envision the stock moving up much until later in the year when profit growth is expected to accelerate. MKC ranks 31st of 32 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 31 of 32 |
