Stock (Symbol) |
McCormick (MKC) |
Stock Price |
$97 |
Sector |
| Food & Necessities |
Data is as of |
| November 4, 2017 |
Expected to Report |
| Jan 23 |
Company Description |
 MKC Incorporated manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry, 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. Source: Thomson Financial |
Sharek’s Take |
 McCormick (MKC) is a great stock for conservative investors who appreciate slow stable growth. The stock is usually at the bottom of my Conservative Portfolio Power Rankings as the P/E is usually over 20 while profit growth is in the single digits. But now MKC might be ready to make another move higher as profits are expected to climb 13% on average the next 4 qtrs. What can fuel the growth is McCormick’s largest acquisition ever, Reckitt Benckiser’s food business, which includes brands such as French’s mustard and Frank’s Red Hot sauce. McCormick overpayed for these brands, but won a bidding war, and gets Frank’s Red Hot –the best hot sauce on the market. French’s and Franks will become McCormick’s number two and three brands. 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. Last month the company raised its qtrly dividend from $0.47 to $0.52 a share — the 32st consecutive year of increases. The dividend is now double what it was in 2010. Management returns more than 2/3rd of cash from operations to shareholders with dividends and stock buybacks. With profit growth set to accelerate, McCormick could break out of its long base and move higher in the coming year. But keep in mind, this is a slow-grower, so don’t expect a big move. My 2018 Fair Value is $107, which is 10% higher than the recent quote. Shareholders also earn a yield of 2%. Not bad for top quality. |
One Year Chart |
 Sales increased 9% last qtr, much better than the 5% the qtr before. Profits increased 9%, well ahead of the 4% estimate. McCormick has beaten the street by a good ammount the past two qtrs. The lower dollar is clearly helping profits (a strong dollar hurt profits in years past). Qtrly Estimates for the next 4 qtrs are 19% and 13% and 9% and 11%. It’s conceivable MKC could deliver 15% profit growth the next 4 qtrs. That would be great! |
Fair Value |
 My Fair Value on MKC continues to be 23x earnings, which is $107 a share for 2018. And 2018 profit estimates just jumped from $4.08 to $4.22 so my Fair Value might increase again next qtr if MKC increases estimates again. |
Bottom Line |
 McCormick’s is a safe and solid investment for conservative buy-and-hold investors. The growth in the stock the past ten years is beautiful to see on the chart. I think 10% growers that pay a 2% yield are very valuable. And with this one you might be able to buy-and-hold for decades. I really love Frank’s Red Hot sauce and I’m glad to see a company take that franchise over as it was underutilized in years past. With profit growth expected to accelerate, this stock has a chance to go on a run higher. MKC moves up in my Conservative Portfolio Power Rankings from 29th last qtr to 27th this qtr, and the only reason it didn’t move up higher is it’s just 10% away from my 2018 Fair Value. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 27 of 32 |
