McCormick & Company Q2 Adjusted Earnings Top By A Penny

McCormick & Company, Incorporated MKC announced 11.3 percent increase in net profit for the second quarter driven by 4 percent sales growth and 1.7 percentage points improvement in the gross margin. However, the adjusted earnings remained flat and came in above the Street analysts' estimations by a penny.

The stock was up more than 2 percent in the pre-market session.

McCormick reported net income of $93.8 million for the second quarter, up 11.3 percent from $84.3 million while earnings grew 12.3 percent to $0.73 from $0.65 a share in the year-ago quarter. On an adjusted basis, earnings were $0.75 a share for both the periods. This was higher by a penny from the Street expectations of $0.74 a share.

The company's top line advanced 3.5 percent to $1.06 billion from $1.024 billion in the previous year quarter. This was in line with the analysts' predictions. The company added that its resulted included a negative impact of two percent from forex rates.

McCormick's President and CEO, Lawrence Kurzius, commented, "McCormick's second quarter results continued the strong performance we had in the first quarter of fiscal year 2016. Led by our consumer segment, we increased sales 4% and in constant currency, the increase was 6%. Underpinning our growth is the rise in consumer demand for healthy flavor and high quality products, and we are meeting this demand with an expanding portfolio of on-trend products. In the second quarter, we introduced a number of new products and were pleased to expand our portfolio with the acquisition of Gourmet Garden, a leader in chilled, convenient herbs."

He continued, "In addition to higher sales, we significantly increased second quarter gross profit margin. Led by our Comprehensive Continuous Improvement (CCI) program, we are improving productivity and lowering costs throughout the company. We are making great progress toward our four-year goal to achieve $400 million of cost savings by 2019, and have increased our cost savings goal for 2016 to a range of $100 million to $110 million. These cost savings are driving margin improvement and are our fuel for growth, providing the funds for higher brand marketing, product development and acquisitions."

Going forward, McCormick continued to expect adjusted earnings to be $3.65-$3.75 a share for the fiscal year 2016. However, the company reduced its GAAP earnings to $3.63-$3.70 a share from $3.65-$3.72 a share to reflect increased special charges. The company expects sales to grow 1–3 percent. The mid-point of both earnings and sales fell short of analysts' expectations of $3.74 a share on sales growth of 2.6 percent.