Bernstein raises McCormick stock target to $101, keeps Outperform

On Wednesday, Bernstein analyst Alexia Howard increased the price target for McCormick & Company (NYSE:MKC) shares to $101.00 from the previous $95.00, while continuing to recommend the stock as Outperform. The adjustment comes after McCormick reported mixed results for the first quarter of 2025 but anticipates improved profit growth in the upcoming quarter.

McCormick’s Consumer Segment experienced a 16% decline in profit in constant currency terms, influenced by a 1.4% decrease in pricing. This follows a 3% profit reduction in the previous quarter, which was due to a 1% reduction in pricing. Howard notes that this pricing issue has raised concerns among investors. However, she predicts that the situation will improve as the company moves past the period of price gap compression that began last year, making the year-over-year comparisons more favorable. Despite these challenges, InvestingPro analysis highlights McCormick’s strong dividend history, having maintained payments for 54 consecutive years with 39 years of consecutive increases - a testament to its financial resilience.

The Flavor Solutions division of McCormick showed signs of recovery, with organic sales growth (OSG) reaching 3.3%. This increase was supported by a 1.8% rise in volume/mix and a 1.5% increase in pricing. The performance marks an improvement from the 1% OSG in the previous quarter, which was solely driven by pricing. Despite potential headwinds from PepsiCo (NASDAQ:PEP)’s likely weak sales growth, which accounts for 13% of McCormick’s total sales, the upcoming quarter’s comparables are expected to be easier, which Howard finds encouraging. The company’s total revenue stands at $6.7 billion for the last twelve months, with a gross profit margin of 38.6%.

The decision to maintain the Outperform rating and raise the price target is based on maintaining an 18.9x multiple and increasing the estimated EBITDA for the second half of 2025 from $1,579 million to $1,670 million. Howard’s analysis suggests a positive outlook for McCormick’s financial performance in the near term. With an EV/EBITDA multiple of 20.35x and additional financial insights available on InvestingPro, including over 30 key metrics and exclusive ProTips, investors can gain a comprehensive understanding of McCormick’s valuation and growth prospects.

In other recent news, McCormick & Company reported its Q1 2025 earnings, revealing a slight miss on earnings per share (EPS) compared to forecasts. The company reported an EPS of $0.60, falling short of the $0.64 forecast, while revenue met expectations at $1.61 billion. Despite the earnings miss, McCormick’s organic sales increased by 2%, driven by a 3% rise in its Flavor Solutions segment and a 1% increase in its Consumer segment. Analysts at TD Cowen adjusted their outlook on McCormick, lowering the price target from $92.00 to $90.00, while maintaining a Buy rating, noting robust volume growth despite earnings falling short. Stifel analysts reaffirmed their Hold rating on McCormick, maintaining a price target of $82.00, and highlighted McCormick’s strong first-quarter performance, including a 2% increase in organic sales and a 20 basis point gross margin expansion. Additionally, McCormick’s CEO, Brendan Foley, acknowledged an increase in reformulation efforts among their consumer packaged goods and restaurant customers in the United States, aligning with broader industry trends towards health-conscious products. These developments suggest McCormick is adapting to consumer demands and maintaining its market position despite facing ongoing cost pressures.

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