McCormick & Co. Earnings: Revenues Top Estimate, Net Income Rises

S&P 500 (NYSE:SPY) component McCormick & Company Inc. (NYSE:MKC) reported its results for the second quarter. McCormick & Company manufactures flavor products including spices, herbs, extracts, seasonings, flavorings, and other food products.

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McCormick & Company Inc. Earnings Cheat Sheet

Results: Net income for McCormick & Company Inc. rose to $80.4 million (60 cents per share) vs. $73.6 million (55 cents per share) in the same quarter a year earlier. This marks a rise of 9.2% from the year-earlier quarter.

Revenue: Rose 11.4% to $984 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: McCormick & Company Inc. fell short of the mean analyst estimate of 61 cents per share. Analysts were expecting revenue of $969.8 million.

Quoting Management: Alan D. Wilson, Chairman, President and CEO, commented, “We achieved a double-digit increase in sales and strong profit growth in our second quarter. In a difficult economic environment, McCormick is delivering financial results that demonstrate the strength of our brands and our customer relationships in markets around the world. Acquisitions, new products, marketing programs and expanded distribution are driving sales growth in each geographic region, with particular strength in emerging markets which accounted for 14% of second quarter sales. “Across all of our businesses, we continue to face volatile material costs. As reflected in our gross profit margin, which was comparable with the second quarter of 2011, our pricing actions and cost savings from our Comprehensive Continuous Improvement (NYSE:CCI) program are effectively offsetting the impact of higher material costs. CCI is also helping to fuel our growth and through the first half of 2012, we increased our brand marketing support by 15%. This increase, along with product innovation and other initiatives to grow sales, have created momentum as we head into the second half of 2012.”

Key Stats:

The company has seen double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 13.4%, with the biggest boost coming in the third quarter of the last fiscal year when revenue rose 15.8% from the year earlier quarter.

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.2 percentage point to 39.5% from the year-earlier quarter. In that span, margins have contracted an average of 1.8 percentage points per quarter on a year-over-year basis.

Last quarter’s profit increase breaks a streak of three consecutive quarters of year-over-year profit decreases. In the first quarter, net income fell 3% from the year earlier, while the figure dropped 1.4% in the fourth quarter of the last fiscal year and 10.2% in the third quarter of the last fiscal year.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 2 cents, and in the fourth quarter of the last fiscal year, it was ahead by 6 cents.

Looking Forward: The average estimate for the third quarter is steady at 77 cents a share. For the fiscal year, the average estimate has been unchanged at $3.05 a share.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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