McCormick (MKC) Up 15% In 3 Months: Buyouts Fuel Growth
Zacks Investment Research | Dec 11, 2018 03:48AM ET
McCormick & Company, Incorporated (NYSE:MKC) , a leading spices and seasonings company, has been whetting investors’ appetite on the back of strategies to strengthen brands and enhance savings. Notably, the company’s shares have gained 15% in the past three months, against the industry ’s decline of 8.9%. Let’s take a look at some of the aspects that are driving this Zacks Rank #2 (Buy) company.
Efforts to Strengthen Brands
A strong brand portfolio has enabled McCormick to become a cherished name in culinary. A significant chunk of the popularity is attributable to the acquisition of the food division of RB Foods. The deal, which is among the company’s largest, has added iconic brands such as Frank's and French's to the portfolio. These brands command popular products such as Frank's RedHot Sauce and French's Mustard.
Indeed, such renowned products have positioned the company in the leading U.S. condiments category. Encouragingly, these brands drove McCormick’s sales by 10% in the third quarter of fiscal 2018.
Going ahead, management expects to continue gaining from these buyouts and is on track with product launches under these banners. In the past, the company made important acquisitions that include Enrico Giotti SpA and Botanical Food Company. These takeovers have boosted portfolio strength. Other food companies like United Natural Foods (NASDAQ:UNFI) and Conagra Brands (NYSE:CAG) have also been gaining from well-chalked buyouts.
Along with strategic takeovers, the company has been resorting to innovation. Notably, innovations enable McCormick to benefit from the evolving demand for new flavors, spices and herbs. In fact, newly-added products drove sales in the consumer and flavor solutions segments during the third quarter. Health and wellness continue to drive the innovation agenda. Further, the company also resorts to brand marketing to drive sales. In fact, the company has been consistently increasing spending on digital marketing.
Savings Initiatives
McCormick focuses on saving costs and enhancing productivity through the Comprehensive Continuous Improvement (CCI) program. Cost savings through CCI and streamlining actions reached $117 million in fiscal 2017. Moreover, savings from CCI expanded the company’s gross and adjusted operating income margins during the third quarter of fiscal 2018. This marked the company’s 11th consecutive quarter of adjusted operating margin expansion.
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Going forward, the company expects to achieve cost savings worth $105 million for fiscal 2018. Apart from McCormick, robust savings efforts have been aiding the performance of General Mills (NYSE:GIS) , another renowned player in the food industry.
Wrapping Up
Well, such upsides have been aiding McCormick to stay afloat and offset the negative impacts stemming from higher operational costs as well as stiff competition. In fact, the company’s effective policies have led to a stellar top- and bottom-line growth record. We expect the company to continue delivering strong performances and maintain its position as a prominent player in the food space.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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