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On Wednesday, TD Cowen’s analysts adjusted their outlook on McCormick & Company (NYSE:MKC) shares, lowering the price target from $92.00 to $90.00 while maintaining a Buy rating on the stock. The firm noted McCormick’s first-quarter performance, which showcased robust volume growth despite earnings falling short of expectations.
McCick delivered a solid first quarter that aligned with their own projections, according to the analysts. While organic revenue growth of 2.0% surpassed estimates by 30 basis points, earnings per share (EPS) of $0.60 did not meet TD Cowen’s estimate by $0.04. The company’s operating profit was down 3% excluding foreign exchange impacts, against guidance for flat to down figures. Despite these mixed results, InvestingPro analysis reveals the company has maintained dividend payments for an impressive 54 consecutive years, with a current dividend yield of 2.24%.
The analysts highlighted McCormick’s position as a leading company benefiting from health and wellness trends within the larger food industry. McCormick’s volume growth of 2.2%—which stands out against the food industry’s average decline of 2%—along with volume share gains in the U.S., were seen as positive indicators of the company’s momentum in the flavorings category and the success of its marketing strategies. The company maintains a strong financial position with a moderate debt level and healthy gross profit margin of 38.6%, according to InvestingPro data, which offers comprehensive analysis through its Pro Research Reports covering 1,400+ top US stocks.
TD Cowen anticipates that McCormick’s Continuous Cost Improvement program will lead to significant gross margin improvement, ranging from 50 to 100 basis points. This is expected to provide enough buffer for the company to meet its guidance for 4-6% growth in operating profit (excluding a 1% impact from foreign exchange) in fiscal year 2025.
The new price target of $90 per share is based on a 27 times multiple applied to TD Cowen’s 12-month forward EPS estimate for McCormick. This valuation is slightly below the stock’s five-year average price-to-earnings (P/E) ratio of 28 times.
In other recent news, McCormick & Company reported its first-quarter 2025 earnings, revealing a minor shortfall in earnings per share (EPS) compared to forecasts. The company posted an EPS of $0.60, which was below the anticipated $0.64, while revenue aligned with 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. Stifel analysts have maintained a Hold rating on McCormick shares, with a price target of $82, noting the company’s strong first-quarter performance and reaffirmed guidance for 2025.
McCormick’s CEO, Brendan Foley, highlighted increased reformulation efforts among their consumer packaged goods and restaurant customers, aligning with broader industry trends towards healthier food options. The company continues to innovate within its product offerings, focusing on reducing sodium and developing health-conscious products. Additionally, McCormick has been addressing inflationary pressures, with gross margins expected to expand by 50-100 basis points in 2025. The company remains confident in its financial outlook, projecting full-year organic sales growth of 1-3% and an adjusted EPS between $3.03 and $3.08.
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