Spice maker McCormick (MKC +0.74%) used pricing power to offset a decline in demand, leading to better-than-expected revenue and earnings results. Investors are taking notice, sending shares of McCormick up 10% as of noon ET.
A spicy report thanks to strong brand pricing
It has been an uneven earnings season for companies that rely on consumers, with some businesses reporting signs of stress due to higher interest rates and questions about the economy. But McCormick appears to be navigating through this period well.
The company reported earnings of $0.63 per share on revenue of $1.6 billion in its fiscal first quarter ending Feb. 29, topping Wall Street's estimates for $0.58 per share in earnings on sales of $1.56 billion. Revenue was up 3% year over year despite volumes that were down slightly.
Gross profit margin expanded by 140 basis points year over year thanks to favorable product mix and the impact of the company's cost-saving plan.
"We are pleased to start the year with strong first quarter performance, which reflects the early success of our prioritized investments to drive impactful results," CEO Brendan M. Foley said in a statement. "We remain confident in the sustained trajectory of our business, and in our ability to deliver on our 2024 outlook and our long-term financial objectives."
NYSE: MKC
Key Data Points
Is McCormick a buy after its strong earnings report?
McCormick is forecasting revenue to be flat to down slightly in fiscal 2024, but sees operating income growing by 8% to 10%. That's a testament to the company's ability to price its core brands aggressively, in addition to the effects of cost-cutting initiatives.
Economic storm clouds remain, but McCormick's quarter is a good reminder of the power of this collection of brands. This stock is still a good candidate for investors looking for steady performance, a solid dividend, and the potential for growth when times are good.
