McCormick & Company (MKC) demonstrated impressive performance in the stock market year to date. MKC outperformed the Zacks Food - Miscellaneous industry's growth of 2.3% in the said period, registering a gain of 16.9%. It has also surpassed the broader Consumer Staples sector's increase of 9% in the same time frame. McCormick's recent success stems from its effective strategic initiatives. With a global portfolio aligned with consumer trends and innovative product platforms, the company's focus on growth ar ...

Strategic Expansion Efforts - McCormick has strategically increased its presence through acquisitions, including a 100% stake in FONA International in December 2020 and the acquisition of Cholula Hot Sauce's parent company in November 2020, enhancing its flavor solutions segment and condiment platform [1][3] - The company incurred $130 million in capital expenditures in the second quarter of fiscal 2024 to increase capacity, advance digital transformation, and optimize cost structure [1] Key Growth Drivers - McCormick is focused on long-term growth with a competitive global portfolio, emphasizing high-growth and profitable areas [3] - The company prioritizes investments in brand promotion, product innovation, and proprietary technology, supported by cost-saving programs to drive operating margin growth [4] - Management anticipates a favorable impact from pricing actions taken in the previous year and is optimistic about innovation plans for 2024 [4] Financial Performance Expectations - For fiscal 2024, McCormick expects adjusted operating income to grow by 3-5%, with adjusted earnings per share projected between $2.80 and $2.85, indicating a 4-6% increase from the previous year [16] - The Zacks Consensus Estimate for Freshpet indicates sales growth of 24.8% and earnings growth of 177.1% for the current financial year [2] Challenges - McCormick faces challenges with soft volumes due to consumer demand driven by financial anxiety, particularly among mid-to-low-income households [11] - Cost inflation is expected to increase in the low single digits for fiscal 2024, alongside a high-single-digit increase in brand marketing expenditures [6]

Key segments and market insights In this analysis, we will examine McCormick & Co. Inc. (MKC, Financial), one of the famous Dividend Aristocrats. McCormick boasts of an extensive track record of financial stability as well as shareholder returns, having an uninterrupted history of dividend payments since 1925. The company, which has increased its dividend payments for 38 consecutive years, underscores its commitment to gratifying investors with rising dividends. We will take a look at McCormick's financial ...

igoriss/iStock via Getty Images While the recent tail higher is encouraging, it does pale in comparison with much of the market's gains. Still, we like an allocation here, as demand for its seasoning and spice lines from both the consumer and commercial sources remains strong. While sales growth had stalled recently as rampant inflation and economic slowdowns more broadly weighed, earnings continue to expand, and this year it appears that earnings will be expanding nicely from 2023. We still view MKC as a l ...

```markdown [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Q2 2024, reporting a net income of $184.2 million and diluted EPS of $0.68 [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This subsection presents the unaudited financial statements for Q2 2024, showing net income of $184.2 million and total assets of $12.99 billion Condensed Consolidated Income Statement Highlights (Q2 2024 vs Q2 2023) | Metric (in millions, except per share) | Three months ended May 31, 2024 | Three months ended May 31, 2023 | | :--- | :--- | :--- | | Net sales | $1,643.2 | $1,659.2 | | Gross profit | $619.6 | $615.5 | | Operating income | $234.1 | $221.8 | | Net income | $184.2 | $152.1 | | Earnings per share – diluted | $0.68 | $0.56 | Condensed Consolidated Balance Sheet Highlights | Metric (in millions) | May 31, 2024 | November 30, 2023 | | :--- | :--- | :--- | | Total current assets | $2,069.4 | $2,001.6 | | Total assets | $12,987.6 | $12,862.3 | | Total current liabilities | $2,984.3 | $3,098.9 | | Long-term debt | $3,325.8 | $3,339.9 | | Total liabilities | $7,633.4 | $7,778.8 | | Total shareholders' equity | $5,354.2 | $5,083.5 | Condensed Consolidated Cash Flow Statement Highlights (Six Months Ended) | Metric (in millions) | Six months ended May 31, 2024 | Six months ended May 31, 2023 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $301.5 | $394.2 | | Net cash flow used in investing activities | $(130.1) | $(116.1) | | Net cash flow used in financing activities | $(172.2) | $(518.1) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This subsection details financial statement notes, including supplier finance program balances, special charges, and segment performance - As of **May 31, 2024**, amounts due to suppliers participating in the Supply Chain Financing (SCF) program were approximately **$360.4 million**, up from **$300.5 million** as of **November 30, 2023**[29](index=29&type=chunk) Special Charges (in millions) | Period | Employee severance and related benefits | Other costs (Cash & Non-Cash) | Total special charges | | :--- | :--- | :--- | :--- | | **Three months ended May 31, 2024** | $1.0 | $0.8 | $1.8 | | **Six months ended May 31, 2024** | $3.1 | $2.9 | $6.0 | Segment Performance (Six months ended May 31, 2024, in millions) | Segment | Net Sales | Operating Income (excl. special charges) | | :--- | :--- | :--- | | Consumer | $1,826.0 | $325.6 | | Flavor Solutions | $1,419.9 | $148.0 | | **Total** | **$3,245.9** | **$473.6** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes Q2 2024 financial performance, noting a 1.0% sales decline, 5.5% operating income increase, and updated full-year 2024 outlook [Overview and 2024 Outlook](index=25&type=section&id=Overview%20and%202024%20Outlook) This section provides an overview of Q2 2024 performance, including a 1.0% sales decline and the updated full-year 2024 outlook - In **Q2 2024**, sales declined **1.0%**, while operating income increased **5.5%**. Adjusted diluted EPS rose **15.0%** to **$0.69** from **$0.60** in the prior year[85](index=85&type=chunk)[86](index=86&type=chunk) Fiscal Year 2024 Outlook | Metric | Projected Change vs. 2023 | | :--- | :--- | | Net Sales | -2% to 0% (incl. 1% unfavorable FX impact) | | Operating Income | +8% to +10% | | Adjusted Operating Income | +3% to +5% (incl. 1% unfavorable FX impact) | | Adjusted Diluted EPS | $2.80 to $2.85 (+4% to +6%) | [Results of Operations – Company](index=27&type=section&id=Results%20of%20Operations%20%E2%80%93%20Company) This section details the company's Q2 2024 operational results, including a 1.0% net sales decrease and improved gross profit margin Company Results of Operations (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,643.2M | $1,659.2M | (1.0)% | | Gross Profit | $619.6M | $615.5M | 0.7% | | Gross Profit Margin | 37.7% | 37.1% | +60 bps | - The **Q2 2024** effective tax rate was **13.5%**, significantly lower than **22.1%** in **Q2 2023**. This was primarily due to a **$19.4 million** discrete tax benefit related to an international legal entity reorganization[109](index=109&type=chunk)[110](index=110&type=chunk) - Income from unconsolidated operations, mainly from McCormick de Mexico, increased by **$6.5 million** to **$16.8 million** in **Q2 2024**[114](index=114&type=chunk) [Results of Operations – Segments](index=29&type=section&id=Results%20of%20Operations%20%E2%80%93%20Segments) This section analyzes Q2 2024 performance for the Consumer and Flavor Solutions segments, highlighting sales and operating income trends Consumer Segment Results (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $904.5M | $912.1M | (0.8)% | | Segment Operating Income | $149.3M | $153.6M | (2.8)% | | Segment Operating Margin | 16.5% | 16.8% | -30 bps | Flavor Solutions Segment Results (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $738.7M | $747.1M | (1.1)% | | Segment Operating Income | $86.6M | $81.4M | 6.3% | | Segment Operating Margin | 11.7% | 10.9% | +80 bps | [Liquidity and Financial Condition](index=36&type=section&id=Liquidity%20and%20Financial%20Condition) This section discusses the company's liquidity and financial condition, including cash flow from operations and debt obligations - Net cash provided by operating activities decreased by **$92.7 million** to **$301.5 million** for the six months ended **May 31, 2024**, compared to the same period in **2023**[158](index=158&type=chunk) - The company has a significant upcoming cash requirement for the maturity of its **$700.0 million**, **3.15%** notes due in **August 2024**[170](index=170&type=chunk) - The company maintains a committed five-year **$1.5 billion** revolving credit facility which will expire in **June 2026**[167](index=167&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=39&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company reports no significant changes in its market risk exposures related to foreign exchange, interest rates, commodities, or credit since its fiscal year-end 2023 report - There have been no significant changes in the company's financial instrument portfolio or market risk exposures since the **November 30, 2023** fiscal year end[179](index=179&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=39&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Based on an evaluation conducted by management, including the Chief Executive Officer and Chief Financial Officer, the company concluded that its disclosure controls and procedures were effective as of May 31, 2024 - The company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[180](index=180&type=chunk) - No change occurred in the company's internal control over financial reporting during the last fiscal quarter that materially affected, or is reasonably likely to materially affect, internal controls[181](index=181&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reports that there are no material pending legal proceedings in which it or its subsidiaries are a party - There are no material pending legal proceedings in which we or our subsidiaries is a party or in which any of our or their property is the subject[183](index=183&type=chunk) [ITEM 1.A RISK FACTORS](index=40&type=section&id=ITEM%201.A%20RISK%20FACTORS) The company states there have been no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended November 30, 2023 - There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended **November 30, 2023**[184](index=184&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=40&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's equity security repurchases during Q2 2024 and remaining share repurchase authorization Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased (CS) | Average Price Paid per Share | | :--- | :--- | :--- | | March 2024 | 34,564 | $68.15 | | April 2024 | 3,400 | $74.80 | | May 2024 | 21,967 | $74.36 | | **Total** | **59,931** | **$70.80** | - As of **May 31, 2024**, **$497 million** remained of the **$600 million** share repurchase authorization approved by the Board of Directors in **November 2019**[188](index=188&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=41&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reports that there were no defaults upon its senior securities during the reporting period - None[190](index=190&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=41&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - Not Applicable[191](index=191&type=chunk) [ITEM 5. OTHER INFORMATION](index=41&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reports that none of its directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the second quarter of 2024 - None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarterly period covered by this report[192](index=192&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with or incorporated by reference into the Form 10-Q, including corporate governance and financial data - The report includes a list of filed exhibits, such as Articles of Incorporation, By-Laws, indentures, various incentive and compensation plans, and certifications pursuant to the Sarbanes-Oxley Act[193](index=193&type=chunk)[195](index=195&type=chunk) ```

Group 1 - McCormick reported diluted earnings per share (EPS) of 68 cents, exceeding the year-ago period and consensus expectations of 59 cents [1] - Net sales decreased by 1% to $1.64 billion, slightly surpassing expectations [1] - The company reaffirmed its fiscal 2024 guidance, projecting EPS of $2.76 to $2.81 and sales growth of 0% to 2% [9] Group 2 - The Europe, Middle East and Africa (EMEA) segment led consumer sales growth, with a 5% rise in consumer sales, while the Americas experienced a 2% decline [7] - EMEA growth was driven by a 4% increase in consumer volume during the quarter [7] - Overall consumer sales slowed by 1% year-over-year [7] Group 3 - Following the earnings release, McCormick shares rose by 4.7% to $70.92, marking a 3.7% gain since the beginning of the year [4][5] - CEO Brendan Foley highlighted that investments in the consumer segment resulted in substantial sequential volume improvement and anticipated continued momentum for the second half of the year [6]

Shares of flavorings and spices leader McCormick (MKC 4.82%) were up 4% as of 12:45 p.m. ET on Thursday, according to data provided by S&P Global Market Intelligence. McCormick continues to turn things around A price-to-sales (P/S) ratio of 2.8 means McCormick could prove to be a blue chip stock trading at a fair price. The company would be trading at a below-market valuation of 21 times earnings if it can return to the 13.5% net profit margins it averaged prior to the high inflation of 2022 and 2023. stret ...

Financial Data and Key Metrics Changes - In the second quarter, sales declined by 1% in constant currency, reflecting flat pricing and a 1% decline in volume and product mix [27] - The adjusted effective tax rate for the second quarter was 13.6%, compared to 22.3% in the previous year, with expectations for the full year to be around 22% [17][39] - Cash flow from operations was $302 million in the first half of 2024, down from $394 million in 2023, primarily due to increased incentive compensation payments [18] Business Line Data and Key Metrics Changes - Consumer sales in the Americas declined by 2% year-over-year, with volume growth in spices and seasonings offset by declines in prepared food categories [16] - In EMEA, constant currency Consumer sales increased by 4%, driven entirely by volume growth across product categories [16] - The Flavor Solutions segment experienced softness in volumes related to quick service restaurant (QSR) and packaged food customers, but improvements are expected in the second half of the year [27] Market Data and Key Metrics Changes - Consumers are exhibiting value-seeking behavior, with financial anxiety particularly high among mid- to low-income households in the United States due to inflation [7] - The company noted strong performance in the Americas for recipe mixes, particularly in Mexican product lines, contributing to volume growth [8] - In Asia Pacific, outside of China, strong volume growth was achieved, although performance in China was tempered as expected [4] Company Strategy and Development Direction - The company is focused on brand marketing investments, innovation, and expanding distribution to meet evolving consumer demands [5][11] - The management emphasized the importance of diversifying the customer base and collaborating with customers to support innovation plans [10] - The company plans to maintain its outlook for 2024, expecting top-line growth to be at the mid- to high-end of the guidance range [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the initiatives being implemented, despite a cautious view on the consumer environment [47] - The company expects to return to total volume growth during the second half of the year, absent any new macroeconomic headwinds [19] - Management highlighted that cooking at home remains elevated, benefiting the company's categories, particularly spices and seasonings [96] Other Important Information - The company is launching new products in the second half of the year, which are expected to drive top-line growth [13] - The transition in management was noted, with Mike Smith announcing his retirement and Marcos Gabriel stepping into the CFO role [33][34] Q&A Session Summary Question: What is the outlook for consumer trends in the second half? - Management remains cautious but confident in their initiatives, expecting sequential improvement in Q3 and Q4 [61][68] Question: Are there plans to diversify the Flavor Solutions customer base? - The company is continuously shaping its portfolio towards higher value-added products and technologies to diversify its customer base [71][72] Question: How does the company view pricing actions in the context of consumer financial pressures? - The company is implementing surgical pricing actions and believes they are positioned well to meet consumer needs despite financial pressures [87][95] Question: What are the expectations for gross margin improvements in the second half? - Management expects continued sequential improvement in gross margins, driven by volume growth and cost-saving initiatives [134]

Management is encouraged by its positive business momentum, which is expected to strengthen throughout the year. Management reaffirmed its fiscal 2024 outlook. Quarter in Detail McCormick's gross profit margin expanded 60 basis points. The upside can be attributed to cost savings from the Comprehensive Continuous Improvement (CCI) program. primarily due to the economic conditions in China, and declines in prepared food categories like Frozen and Asian in the Americas. Sales fell 2% year over year in the Ame ...

McCormick (MKC) reported $1.64 billion in revenue for the quarter ended May 2024, representing a year-overyear decline of 1%. EPS of $0.69 for the same period compares to $0.60 a year ago. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. View all Key Company Metrics for McCormick here>>> While investors scrutinize revenue and earnings ...