McCormick (NYSE:MKC) - Share price, News & Analysis

Q: What is the Fair Price of MKC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

MKC ($88.33) is trading below our estimate of [[fair value]] ($89.81)

MKC fundamental analysis
Snowflake Score
Valuation	1/6
Future Growth	1/6
Past Performance	2/6
Financial Health	1/6
Dividends	5/6

MKC Stock Overview

McCormick & Company, Incorporated manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry.

Rewards

Trading at 1.7% below our estimate of its fair value

Earnings are forecast to grow 7.85% per year

Pays a reliable dividend of 1.68%

Risk Analysis

Debt is not well covered by operating cash flow

Significant insider selling over the past 3 months

McCormick Competitors

Hormel Foods

NYSE:HRL

US$26.7b

Kellogg

NYSE:K

US$25.5b

Tyson Foods

NYSE:TSN

US$31.6b

Conagra Brands

NYSE:CAG

US$16.5b

Price History & Performance

Summary of all time highs, changes and price drops for McCormick
Historical stock prices
Current Share Price	US$88.33
52 Week High	US$107.35
52 Week Low	US$77.85
Beta	0.49
1 Month Change	6.83%
3 Month Change	-9.44%
1 Year Change	5.87%
3 Year Change	8.05%
5 Year Change	82.07%
Change since IPO	2,657.62%

Recent News & Updates

Jul 18

These 4 Measures Indicate That McCormick (NYSE:MKC) Is Using Debt Extensively

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Jul 08

McCormick Stock: Not The Most Flavorful Prospect Out There

McCormick & Company has fared quite well in recent years, but the company is currently experiencing a bit of weakness. Even so, management has positive expectations for the year, with sales and profits expected to rise year-over-year. Despite this, shares look a bit lofty and it's likely that investors can find better opportunities elsewhere at this time. To the vast majority of people, flavor is incredibly important. Generally speaking, humans gravitate toward food that is pleasing to their palate. And while it may seem obvious for companies that focus on food production to emphasize making sure that food tastes as good as possible, there is one multi-billion-dollar company whose primary set of operations is organized around helping our food taste better. This household name is McCormick & Company (MKC). In recent years, the enterprise has done well to grow both its top and bottom lines. It truly is a high-quality business in the food space and, in the long run, it's almost certain that investors will generate attractive returns. Having said that, there are two issues that are worth paying attention to. First, recent financial performance for the business has been somewhat disappointing. This comes as management has remained bullish about the 2022 fiscal year even as they reduced guidance. And second, shares of the company are trading at rather lofty levels. The first issue is largely transitory and, as a result, should not warrant the concern of investors all that much. But the second issue could result in subpar returns moving forward. Because of this latter issue, I have decided to rate the business a 'hold' for now. Not so tasty According to the management team at McCormick & Company, the company operates as a global leader in the flavor market. It does this by producing and selling spices, seasoning mixes, condiments, and other flavor-oriented products across the food spectrum. But to best understand the company, we would be wise to break it down into its two key operating segments. The first and largest of these is known as its Consumer segment. Through this, the company sells a variety of flavorful products, such as spices and seasonings, as well as condiments and sauces. In fact, two-thirds of the revenue associated with this segment comes from those four categories. The company also produces herbs, dessert items, and other related products. It offers these products through a variety of industry-leading brands, such as McCormick, French's, Frank's RedHot, Lawry's Club House, OLD BAY, Vahine, Kamis, Gourmet Garden, and more. These products are sold to a variety of retailers, distributors, wholesalers, and other parties, all across roughly 160 different countries and territories. During its 2021 fiscal year, this particular segment accounted for 62.3% of the company's revenue and for an impressive 73.1% of its profits. The other segment is called Flavor Solutions. Through this segment, the company provides a variety of products to multinational food manufacturers and food service customers. To the food service customers, it offers branded, packaged products sold both by it directly and by distributors indirectly. The specific types of products sold through this segment include seasoning blends, spices, herbs, condiments, coating systems, and compound flavors. Last year, this segment was responsible for 37.7% of the company's revenue and for 26.9% of its profits. There are some other important notes that investors should make. For instance, while the company is most certainly a global enterprise, it still is heavily reliant on the U.S. market. Last year, for instance, its domestic operations accounted for 60.4% of the company's revenue. This is roughly level with what the picture looked like two years earlier. A further 18.9% of sales came from a combination of Europe, the Middle East, and Africa, while all other countries combined made up 20.7% of sales. Author - SEC EDGAR Data The general financial picture for the business has been quite robust in recent years. Revenue expanded constantly between 2017 and 2021, climbing from $4.73 billion to $6.32 billion. Growth was particularly strong between 2020 and 2021, coming in at 12.8%. This was driven by a variety of factors. For instance, for its legacy operations, volume and product mix changes pushed sales up by 5.5%. Despite inflationary concerns, pricing actions contributed just 0.8% to the company's top line growth. Foreign currency fluctuations accounted for 2.4%, while acquisitions accounted for 4.1%. As revenue has risen, profitability has also increased. Although a bit lumpy, net income rose from $477.4 million in 2017 to $755.3 million in 2021. Other profitability metrics also were positive. Between 2017 and 2020, operating cash flow rose from $815.3 million to $1.04 billion. This metric did worsen in 2021, falling to $828.3 million. But if we adjust for changes in working capital, cash flow expansion between 2017 and 2020 would have been consistent, climbing from $655.1 million to $1.02 billion. Meanwhile, EBITDA for the company rose from $897 million to $1.28 billion. Author - SEC EDGAR Data So far, the 2022 fiscal year is looking a bit mixed for the company. For the first half of the year as a whole, revenue of $3.06 billion does translate to a modest increase over the $3.04 billion reported the same time one year earlier. However, overall revenue in the second quarter was a bit weak, falling from $1.56 billion in 2021 to $1.54 billion this year. Not only that, management actually missed expectations on sales to the tune of $70.7 million. There were a number of contributors to this pain. For instance, volume and product mix changes impacted sales to the tune of 6.6%. The Consumer segment was the culprit, with some pain coming as a result of the war between Russia and Ukraine. Lower sales in China and India also impacted the company's operations. Meanwhile, pricing actions offset this, adding 6.8% to the company's revenue. But foreign currency fluctuations hit the business to the tune of 1.5%. Author - SEC EDGAR Data When it comes to profitability, the picture for the first half of the year is not great. Net income fell from $345.5 million in the first half of 2021 to $273.4 million the same time this year. Net income in the latest quarter alone came in at $118.5 million. That's down from the $183.7 million reported just one year earlier. In addition to declining year over year, the company also missed expectations on its bottom line to the tune of $0.22 per share, with earnings ultimately totaling $0.44 per share. This first-half decline was driven in large part by a decline in the company's gross profit margin from 39.2% to 35.4%, with the second quarter proving particularly painful. The company attributed this to a couple of factors, including the margin dilutive impact of pricing actions the company took in response to inflationary pressures, as well as to increased commodity, packaging material, and transportation costs, amongst other things. McCormick & Company Despite this pain, management seems to have high hopes for the company. They still believe that revenue will rise between 3% and 5% this year, with constant currency revenue climbing by between 5% and 7%. The total revenue expectation remains unchanged from the company's prior guidance. Management did ultimately reduce expectations for earnings per share for the entire year. Excluding integration costs associated with its aforementioned acquisitions, the company now anticipates earnings of between $3.03 and $3.08 per share. Prior guidance was for earnings to be between $3.17 and $3.22 per share.

Shareholder Returns

	MKC	US Food	US Market
7D	1.1%	0.7%	1.0%
1Y	5.9%	6.9%	-12.9%

Return vs Industry: MKC underperformed the US Food industry which returned 6.9% over the past year.

Return vs Market: MKC exceeded the US Market which returned -12.8% over the past year.

Price Volatility

Is MKC's price volatile compared to industry and market?
MKC volatility
MKC Average Weekly Movement	3.9%
Food Industry Average Movement	6.1%
Market Average Movement	7.9%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.2%

Stable Share Price: MKC is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: MKC's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1889	14,000	Lawrence Kurzius	https://www.mccormickcorporation.com

McCormick & Company, Incorporated manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. It operates in two segments, Consumer and Flavor Solutions. The Consumer segment offers spices, herbs, and seasonings, as well as condiments and sauces, and desserts.

McCormick Fundamentals Summary

How do McCormick's earnings and revenue compare to its market cap?
MKC fundamental statistics
Market Cap	US$23.70b
Earnings (TTM)	US$683.20m
Revenue (TTM)	US$6.34b

34.7x

P/E Ratio

3.7x

P/S Ratio

Is MKC overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
MKC income statement (TTM)
Revenue	US$6.34b
Cost of Revenue	US$3.95b
Gross Profit	US$2.39b
Other Expenses	US$1.71b
Earnings	US$683.20m

Last Reported Earnings

May 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	2.55
Gross Margin	37.71%
Net Profit Margin	10.78%
Debt/Equity Ratio	116.5%

How did MKC perform over the long term?

See historical performance and comparison

Dividends

1.7%

Current Dividend Yield

56%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is MKC undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

1/6

Valuation Score 1/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for MKC?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for MKC. This is calculated by dividing MKC's market cap by their current preferred multiple.
What is MKC's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$23.70b

MKC key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	4.5x
Enterprise Value/EBITDA	24.6x
PEG Ratio	4.4x

Price to Earnings Ratio vs Peers

How does MKC's PE Ratio compare to its peers?

MKC PE Ratio vs Peers

The above table shows the PE ratio for MKC vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	17.8x
HRL Hormel Foods	27.8x	8.2%	US$26.7b
K Kellogg	17.2x	3.4%	US$25.5b
TSN Tyson Foods	7.8x	-4.1%	US$31.6b
CAG Conagra Brands	18.6x	12.8%	US$16.5b
MKC McCormick	34.7x	7.8%	US$23.7b

Price-To-Earnings vs Peers: MKC is expensive based on its Price-To-Earnings Ratio (34.7x) compared to the peer average (17.8x).

Price to Earnings Ratio vs Industry

How does MKC's PE Ratio compare vs other companies in the US Food Industry?

Price-To-Earnings vs Industry: MKC is expensive based on its Price-To-Earnings Ratio (34.7x) compared to the US Food industry average (17.1x)

Price to Earnings Ratio vs Fair Ratio

What is MKC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

MKC PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	34.7x
Fair PE Ratio	24.6x

Price-To-Earnings vs Fair Ratio: MKC is expensive based on its Price-To-Earnings Ratio (34.7x) compared to the estimated Fair Price-To-Earnings Ratio (24.6x).

Share Price vs Fair Value

What is the Fair Price of MKC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: MKC ($88.33) is trading below our estimate of fair value ($89.81)

Significantly Below Fair Value: MKC is trading below fair value, but not by a significant amount.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is lower than the current share price.

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Future Growth

How is McCormick forecast to perform in the next 1 to 3 years based on estimates from 10 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

7.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: MKC's forecast earnings growth (7.8% per year) is above the savings rate (1.9%).

Earnings vs Market: MKC's earnings (7.8% per year) are forecast to grow slower than the US market (12.8% per year).

High Growth Earnings: MKC's earnings are forecast to grow, but not significantly.

Revenue vs Market: MKC's revenue (3.7% per year) is forecast to grow slower than the US market (7.9% per year).

High Growth Revenue: MKC's revenue (3.7% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: MKC's Return on Equity is forecast to be low in 3 years time (17.7%).

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Past Performance

How has McCormick performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

3.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MKC has high quality earnings.

Growing Profit Margin: MKC's current net profit margins (10.8%) are lower than last year (12.5%).

Past Earnings Growth Analysis

Earnings Trend: MKC's earnings have grown by 3.7% per year over the past 5 years.

Accelerating Growth: MKC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: MKC had negative earnings growth (-9.2%) over the past year, making it difficult to compare to the Food industry average (5.4%).

Return on Equity

High ROE: MKC's Return on Equity (14.8%) is considered low.

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Financial Health

How is McCormick's financial position?

Financial Health Score

1/6

Financial Health Score 1/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: MKC's short term assets ($2.3B) do not cover its short term liabilities ($3.1B).

Long Term Liabilities: MKC's short term assets ($2.3B) do not cover its long term liabilities ($5.2B).

Debt to Equity History and Analysis

Debt Level: MKC's net debt to equity ratio (109.4%) is considered high.

Reducing Debt: MKC's debt to equity ratio has increased from 96.6% to 116.5% over the past 5 years.

Debt Coverage: MKC's debt is not well covered by operating cash flow (14%).

Interest Coverage: MKC's interest payments on its debt are well covered by EBIT (7.9x coverage).

Balance Sheet

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Dividend

What is McCormick current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

1.68%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: MKC's dividend (1.68%) is higher than the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: MKC's dividend (1.68%) is low compared to the top 25% of dividend payers in the US market (4.09%).

Stability and Growth of Payments

Stable Dividend: MKC's dividends per share have been stable in the past 10 years.

Growing Dividend: MKC's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (55.7%), MKC's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: At its current cash payout ratio (79.5%), MKC's dividend payments are covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

6.8yrs

Average management tenure

CEO

Lawrence Kurzius (64 yo)

6.5yrs

Tenure

US$12,718,656

Compensation

Mr. Lawrence E. Kurzius served as the President at McCormick & Company, Incorporated since January 5, 2015 until June 01, 2022 and has been its Chief Executive Officer since February 1, 2016. Mr. Kurzius s...

CEO Compensation Analysis

Compensation vs Market: Lawrence's total compensation ($USD12.72M) is about average for companies of similar size in the US market ($USD13.00M).

Compensation vs Earnings: Lawrence's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: MKC's management team is seasoned and experienced (6.8 years average tenure).

Board Members

Experienced Board: MKC's board of directors are considered experienced (7.6 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: MKC insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/06 00:00
End of Day Share Price	2022/08/05 00:00
Earnings	2022/05/31
Annual Earnings	2021/11/30