McCormick & Co, Inc. - Growth & Income

The company expects to grow sales 5% to 7% in 2011, and analysts are calling for 7% EPS growth. McCormick has also been steadily raising its dividend. It currently yields 2.4%.

Fourth Quarter Results

McCormick reported fourth quarter earnings per share of 99 cents, beating the Zacks Consensus Estimate by 4 cents. It was a 9% increase over the same quarter in 2009.

Overall net sales growth was a decent 5.9%. The Consumer Business segment, which accounted for about 65% of total sales, increased a solid 5.6%. Growth was strongest in the Asia/Pacific market, which increased 12%. Consumer sales in China grew a remarkable 22%.

Consumer sales were up in the Americas too, increasing 9% year-over-year. The Europe, Middle East and Africa region was weak, however, with sales falling 5%.

Industrial business sales, which made up the other 35% of sales, rose 6.7% driven by a 15% increase in Asia/Pacific. The Americas were up 5%, while the EMEA region increased 4%.

The gross margin contracted a bit, from 45.6% of sales to 45.5%. Meanwhile, operating income increased 4.2%.

Growth

The company expects solid growth in 2011 with sales increasing 5% to 7% and earnings of $2.80 to $2.85 per share.

The Zacks Consensus Estimate for 2011 is within this range at $2.82, representing a 7% increase over 2010 EPS. The 2012 estimate is currently $3.06, equating to 8% EPS growth.

Income

McCormick recently hiked its quarterly dividend 7.7%. It has raised it at an average annual rate of 10.8% since 2008.

It currently yields 2.4%.

Valuation

The stock is up about 20% since July 1.

Despite the run up, shares are still reasonably priced, trading at 15.9x forward earnings, below the industry average of 16.5x.

It is a Zacks #2 Rank (Buy) stock.

Read the October 4 article here.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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