Shares of McCormick & Company, Incorporated (MKC – Free Report) tumbled 5.1% in the pre-market session today after the company posted disappointing first-quarter fiscal 2025 results amid a challenging consumer and macro environment. The bottom line missed the Zacks Consensus Estimate and declined year over year. The top line met the consensus mark and was unchanged from the year-ago quarter.
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The adjusted earnings of 60 cents per share declined from 63 cents reported in the year-ago quarter. The bottom line lagged the Zacks Consensus Estimate of 64 cents. The decrease was mainly due to reduced operating income and reduced income from unconsolidated operations, driven by the unfavorable impacts of currency fluctuations, partially offset by a more favorable tax rate.
This global leader in flavor generated sales of $1,605.5 million, in line with the year-ago quarter and included a 2% unfavorable currency impact. Organic sales grew 2% on favorable volume and product mix.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote
MKC’s Quarterly Performance: Key Metrics & Insights
McCormick’s gross profit for the fiscal first quarter rose by $5 million, reaching $604 million. The gross profit margin expanded 20-basis points (bps) to reach 37.6%. The primary driver of this growth was the cost savings achieved through the company’s Comprehensive Continuous Improvement (CCI) program.
The adjusted operating income declined by 5%, totaling $225.2 million, with a 2% unfavorable impact from currency fluctuations. In constant currency, adjusted operating income fell 3%, mainly due to higher selling, general and administrative expenses, thanks to the timing shift of stock-based compensation costs and increased investments in brand marketing and technology.
Decoding MKC’s Segmental Performance
Consumer: Sales came in at $919 million, in line with the year-ago quarter’s level, with a 1% negative impact from currency movements. Organic sales advanced 1%, with a 3% jump in volume and product mix, somewhat negated by a 2% dip in pricing. Sales inched down 0.4% in the Americas and 0.2% in the EMEA region. Segment sales improved 0.4% in the APAC.
Flavor Solutions: Sales in the segment inched up 0.8% to $686 million, with a 2% unfavorable currency impact. Organic sales climbed 3% driven by a 2% increase in volume and product mix, along with a 1% rise from pricing. Flavor Solutions’ sales in the Americas inched up 0.8%. Its sales in the EMEA declined 5.2%. Sales in the APAC market jumped 12.7% year over year.
MKC’s Financial Health Snapshot
McCormick exited the quarter with cash and cash equivalents of $102.8 million, long-term debt of $3,095.7 million and total shareholders’ equity of $5,449.7 million. In the three months ended Feb. 28, 2025, net cash provided by operating activities was $115.5 million.
For fiscal 2025, the company anticipates strong cash flow, driven by profitability and working capital initiatives. In addition, it expects to return a significant portion of this cash flow to shareholders through dividends.
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What to Expect From MKC in 2025?
McCormick’s fiscal 2025 outlook reflects its continued focus on strategic investments in key categories to strengthen volume trends and drive long-term profitable growth amid current uncertainty in the consumer and macroeconomic environment. The company’s CCI program remains a key driver of growth investments and operating margin expansion. In addition, McCormick expects foreign currency fluctuations to negatively impact sales and adjusted operating income by 1% each as well as adjusted earnings per share (EPS) by 2%.
For fiscal 2025, management still expects net sales growth in the range of flat to increasing 2% (up 1-3% at constant currency). Sales are likely to be backed by volume-led growth across both company segments, and gradual improvement in China consumers.
Management expects adjusted operating income to grow 3-5%, and increase 4-6% at constant currency. Management envisions fiscal 2025 adjusted EPS in the band of $3.03-$3.08, which suggests a 3-5% increase from the year-ago period. On a constant currency basis, the adjusted EPS is expected to increase 5-7%. On a GAAP basis, McCormick projects fiscal 2025 earnings in the range of $2.99-$3.04 per share, indicating 2-4% year-over-year growth.
This Zacks Rank #3 (Hold) stock has gained 3.2% in the past three months against the industry’s decline of 2.8%.
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