McCormick shares surge on rise in profits

Shares in McCormick & Co. Inc. surged nearly 5.5 percent Tuesday after it announced that its profit rose nearly 9 percent in the first quarter as the spice company used digital marketing to build its brand and launched new products around the world.

The Hunt Valley-based manufacturer's stock was up $3.69 a share to close at $71.20 a share after it beat earnings and sales forecasts.


It reported a profit of $82.5 million, or 62 cents a share, in the three months that ended Feb. 28, up from $76 million, or 57 cents a share, in the first quarter a year earlier.

Sales grew 6 percent to $993.4 million, with gains that beat expectations on both the consumer and industrial sides of the business.


Analysts for Zacks had expected earnings of 58 cents per share, after lowering expectations three months ago from 63 cents per share.

"Key elements of our consumer business growth strategy include brand building, scalable innovation and expansion of our geographic footprint," said Alan D. Wilson, McCormick's president, chairman and CEO, in a statement, noting the quarter featured higher sales, profit ahead of the company's outlook and strong cash flow.

The spice and flavor company invested an additional $7 million in marketing its brand to connect with consumers through digital and other media as it introduced new products, Wilson said. The company made a bigger push into China last year with the acquisition of bouillon maker Wuhan Asia Pacific Condiments, which also helped drive first quarter consumer sales.

McCormick appears to be making progress with its strategy to better compete with lower-cost private label spice and flavoring products as well as products from smaller manufacturers, said Brian Yarbrough, a consumer analyst for Edward Jones in St. Louis.

"Last quarter, they were losing share to private labels and to smaller players," Yarbrough said.

Extra marketing efforts were expected to take several quarters to show results, he said. "While they are not out of the woods yet, there are signs that it's working."

The industry in general is growing as consumers demand more flavoring options in cooking.

On the industrial side, a 4 percent gain in sales continued a recovery that started in the previous quarter. Growth in sales to food and beverage companies in the U.S. helped offset weaker demand from quick service restaurants.


McCormick reaffirmed plans to boost sales in fiscal 2014 by 3 percent to 5 percent and to reach fiscal year earnings in the range of $3.22 per share to $3.29 per share