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Factors to Note as McCormick (MKC) Readies for Q1 Earnings

McCormick & Company, Incorporated MKC is likely to register a top-line increase from the respective year-ago fiscal quarter’s reading when it reports first-quarter fiscal 2023 earnings on Mar 28. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,545 million, suggesting a rise of 1.5% from the prior-year fiscal quarter’s reported figure.

The Zacks Consensus Estimate for quarterly earnings has risen by a penny in the past 30 days to 49 cents per share. The figure indicates a decline of 22.2% from the figure reported in the prior-year fiscal quarter.

This spice, seasoning mix, condiment and other flavorful product company has a trailing four-quarter negative earnings surprise of 7.1%, on average. MKC delivered a negative earnings surprise of 15.1% in the last reported quarter.

McCormick & Company, Incorporated Price, Consensus and EPS Surprise

McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote

Factors at Play

McCormick has been grappling with cost inflation for a while now. In the fourth quarter of fiscal 2022, the company’s adjusted gross profit margin contracted 410 basis points to 36.8% due to escalated cost inflation, higher other supply-chain expenses and an adverse product mix. Also, McCormick continued to witness supply chain-related issues. The persistence of these headwinds is a worry for the quarter under review.

That said, McCormick has been benefiting from its solid acquisitions and the Comprehensive Continuous Improvement (“CCI”) program.  McCormick focuses on saving costs and enhancing productivity through its CCI program.

On its last earnings call, MKC stated that it anticipates fiscal 2023 to witness a solid underlying business performance, backed by sales growth. It expects the Global Operating Effectiveness Program and the lapping of pandemic-led hurdles to have positively impacted fiscal 2023 operating income, which is likely to be somewhat negated by the impacts of the Kitchen Basics divestiture and a rise in employee incentive compensation costs.

Management expects fiscal 2023 sales growth to be fueled by pricing actions, which, along with cost savings, is likely to help it counter inflationary headwinds. The company anticipates seeing solid growth via brand strength, brand marketing, new products, category management and differentiated customer engagement. These factors bode well for the quarter under review.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for McCormick this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

McCormick has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are three companies worth considering as our model shows that these have the right combination of elements to beat earnings this time.

Kellogg Company K currently has an Earnings ESP of +1.49% and a Zacks Rank of 3. The company is likely to register a top-line increase when it reports fourth-quarter fiscal 2022 results. The consensus mark for K’s quarterly revenues is pegged at around $4 billion, which suggests growth of 7.6% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Kellogg’s earnings has dipped by a penny to $1.01 per share in the past 30 days. The consensus estimate indicates an 8.2% decline from the year-ago quarter’s reported figure.

Sysco Corporation SYY currently has an Earnings ESP of +0.47% and a Zacks Rank #3. The company is expected to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for Sysco’s revenues is pegged at around $19 billion, indicating a rise of 9.9% from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly earnings per share of 92 cents suggests growth of close to 30% from the year-ago quarter. SYY has a trailing four-quarter earnings surprise of 7.1%, on average.

Philip Morris International PM currently has an Earnings ESP of +0.76% and a Zacks Rank of 3. The company is likely to register an increase in the top line when it reports fourth-quarter 2022 results. The Zacks Consensus Estimate for Philip Morris’ quarterly revenues is pegged at $8 billion, which suggests a jump of 3.8% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for PM’s quarterly EPS of $1.31 suggests a 16% decrease from the year-ago quarter. Philip Morris has a trailing four-quarter earnings surprise of 10.9%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Philip Morris International Inc. (PM) : Free Stock Analysis Report

Kellogg Company (K) : Free Stock Analysis Report

McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report

Sysco Corporation (SYY) : Free Stock Analysis Report

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