Why MCCORMICK & CO /SH NV (NYSE: MKC) stock is soaring today

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MCCORMICK & CO /SH NV (NYSE: MKC) stock rose over 7.3% on October 1st, 2019 (as of 12:58 pm GMT-4; Source: Google finance) after the company raised the EPS outlook for the full year though posted mixed results for the third quarter of FY 19. Net income for the quarter to quarter rose to $191.9 million from $173.5 million, in the year-ago period.

MKC in the third quarter of FY 19 has reported the adjusted earnings per share of $1.46, beating the analysts’ estimates for the adjusted earnings per share of $1.29, according to the FactSet consensus. The company had reported the adjusted revenue growth of 0.8 percent to $1.33 billion in the third quarter of FY 19, missing the analysts’ estimates for revenue of $1.34 billion. The consumer segment sales rose 3% to $794.2 million while flavor solutions sales declined 2% to $535.0 million.

Flavor solutions constant currency sales growth in the Europe, Middle East and Africa (EMEA) region, is mainly on the back of the new products and higher base business volume and product mix, was offset by declines in the Americas and Asia Pacific regions.  These declines were driven mainly by the timing of customer activities as well as the company’s transition to a larger warehouse, which temporarily constrained third quarter growth. The consumer sales growth was due to the Americas and Asia Pacific regions attributable to new products, expanded distribution and strong marketing and promotional programs.

For fiscal 2019, the company raised its adjusted earnings per share guidance range to $5.30 to $5.35 from $5.20 to $5.30 but reduced its sales growth outlook to 1% to 2% from 1% to 3%.

The company anticipates to boost sales growth with new products, brand marketing and expanded distribution.  Sales growth is also expected to include the impact of pricing taken to offset an anticipated low-single digit increase in costs.  The company has intends to achieve approximately $110 million of cost savings and intends to use these savings to fund investments to drive continued growth and improve margins. The expected growth in 2019 adjusted operating income is in the range of 6% to 7%, which in constant currency is an 8% to 9% projected growth rate, from adjusted operating income of $930 million in 2018. For FY 19, the company anticipates another year of strong cash flow, with plans to return a significant portion to McCormick’s shareholders through dividends and to pay down debt.

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