UBS maintains McCormick stock rating as shares rise on earnings beat

Investing.com - UBS maintained its Neutral rating and $83.00 price target on McCormick & Company (NYSE:MKC) as the spice maker’s shares jumped more than 5% following its fiscal second-quarter earnings report.

McCormick delivered stronger-than-expected earnings per share in the quarter, primarily due to lower selling, general and administrative expenses. The company’s Consumer segment posted strong top-line results with volume and mix growth exceeding 3%, which more than offset softer organic performance in its Flavor Solutions business. The company maintains a solid financial foundation, earning a "GOOD" overall health score from InvestingPro, with a gross profit margin of 38.5% and consistent dividend payments for 55 consecutive years.

Investors responded positively to McCormick’s reaffirmation of its full-year earnings guidance for fiscal 2025, which UBS noted was a positive surprise given uncertainty around the magnitude of cost and tariff headwinds facing the company.

UBS views McCormick’s outlook more favorably after the earnings report, noting that concerns about costs entering the quarter "proved overblown" and management’s revenue assumptions for the remainder of the year appear "appropriately conservative," particularly in the Flavor Solutions segment.

Despite the improved outlook, UBS remains on the sidelines as McCormick now trades at more than 24 times UBS’s revised next-twelve-month estimates, representing nearly a 70% premium to packaged food peers compared to its long-term average premium of about 63%. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with a P/E ratio of 26.65 and a PEG ratio of 2.48, suggesting relatively expensive valuations. Subscribers can access detailed valuation metrics and 8 additional ProTips in the comprehensive Pro Research Report.

In other recent news, McCormick & Company announced its second-quarter earnings for 2025, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $0.69 compared to the forecasted $0.66. The company’s revenue met expectations at $1.66 billion. McCormick’s strategic initiatives and growth in key segments were highlighted as contributing factors to its solid performance. The company returned $242 million to shareholders through dividends, maintaining investor confidence. McCormick also reported an increase of 10% in adjusted operating income and a cash flow from operations totaling $161 million.

The company continues to anticipate net sales growth of 1-3% for the year, with an adjusted EPS projection between $3.03 and $3.08. Despite facing challenges such as supply chain disruptions and economic pressures, McCormick’s focus on product innovation and market expansion remains strong. Analysts noted that the company is well-positioned to handle tariff-related costs through strategic sourcing and pricing initiatives. The firm’s resilience and strategic execution have been acknowledged by various analysts, emphasizing its competitive edge in the market.

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