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TD Cowen maintains Hold rating on McCormick stock despite only 0.4% organic sales growth

EditorAhmed Abdulazez Abdulkadir
Published 03/10/2024, 12:16 am
MKC
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On Wednesday, TD Cowen maintained a Hold rating on McCormick & Company (NYSE:MKC) while increasing the price target to $86 from $84. This adjustment follows McCormick's third-quarter earnings per share (EPS) which surpassed expectations, coming in at $0.83 compared to the anticipated $0.70. Additionally, the company has updated its full-year 2024 guidance, adding $0.05 to account for a discrete tax benefit.

The financial firm acknowledged McCormick's marginal organic sales growth at 0.4% and noted that planned reinvestment in the fourth quarter is likely to restrict any significant rise in EPS. Despite these factors, the firm adjusted its fiscal year 2024 and 2025 projections for McCormick to reflect a sequential volume improvement and substantial productivity savings.

McCormick's performance in the third quarter has led to a slight uptick in its financial outlook for the coming years. The company's management has responded to the better-than-expected earnings by revising their full-year 2024 guidance upwards, signaling a positive trajectory in their financial planning.

The price target increase signifies a modest expectation of McCormick's stock performance, with the Hold rating suggesting that the financial firm sees the company's current market position as stable but not necessarily poised for significant growth in the near term.

In other recent news, McCormick & Company has reported strong third-quarter earnings for fiscal year 2024, exceeding analyst expectations. The company's adjusted operating income rose by 15% to $288 million year-over-year, and its adjusted earnings per share reached $0.83, surpassing the consensus estimate of $0.67. Despite a slight decline in net sales, McCormick managed to record a sequential volume improvement, demonstrating the effectiveness of its strategic pricing investments initiated earlier in the year.

HSBC has modestly increased McCormick's stock target from $79.00 to $80.00, maintaining a Hold rating on the stock. Meanwhile, Goldman Sachs (NYSE:GS) has reiterated its Sell rating, and Citi has held its Neutral stance, despite the company's strong earnings report.

McCormick has revised its full-year 2024 financial outlook following the robust third-quarter performance. The company now anticipates a neutral impact from foreign exchange rates on sales, operating income, and earnings per share. The updated forecast also includes a tax benefit that will positively affect earnings per share. McCormick expects adjusted earnings per share to range between $2.85 and $2.90 for the fiscal year.

BofA Securities suggests that McCormick's earnings per share guidance may be conservative and has raised its forecast for McCormick's adjusted EPS for fiscal year 2024 to $2.92 from $2.85.

InvestingPro Insights

McCormick & Company's recent performance and analyst outlook are complemented by several key financial metrics and insights from InvestingPro. The company's market capitalization stands at $22.59 billion, reflecting its significant presence in the food industry. With a P/E ratio of 27.99, McCormick is trading at a premium compared to many of its peers, which aligns with the Hold rating from TD Cowen.

InvestingPro Tips highlight McCormick's strong dividend history, having raised its dividend for 38 consecutive years and maintained payments for 54 years. This track record of consistent dividend growth supports the company's appeal to income-focused investors, despite the current dividend yield of 2.0%.

The company's financial health appears solid, with InvestingPro Data showing a revenue of $6.68 billion over the last twelve months as of Q3 2024, and an EBITDA growth of 7.11% over the same period. This growth, coupled with McCormick's ability to generate profits as indicated by its positive earnings outlook, reinforces the company's stable market position mentioned in the article.

It's worth noting that McCormick's stock has shown strong performance recently, with a 20.43% price total return over the past three months. This aligns with the article's mention of the company's better-than-expected earnings and updated guidance.

For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for McCormick & Company, providing a deeper understanding of the company's financial position and market dynamics.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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