McCormick & Co. reported a surge in profits for the third quarter Friday as sales rose amid strong global demand for flavorings and healthy foods.
The Sparks-based spice maker's income jumped nearly a third in the three months ended Aug. 31 to $127.7 million, from $97.6 million a year earlier. Earning per share reached $1, up from 76 cents in 2015's third quarter.
Sales for the quarter increased 3 percent to $1.09 billion, a gain that included the incremental impact of acquiring Stubbs barbecue sauces in 2015 and Gourmet Garden in April. New products, additional brand marketing and expanded distribution also helped boost sales, the company said.
"We are driving both sales growth and significant productivity improvements, and expect 2016 to be a record year for McCormick," said Lawrence E. Kurzius, McCormick's CEO and president, in the company's announcement.
McCormick's stock rose 2.5 percent Friday to close at $99.92 a share.
Joseph Agnese, an equity analyst at S&P Global Market Intelligence, raised the company's stock rating to "buy" from "hold" and said the company's sales gain, which would have been 6 percent without currency fluctuations, beat estimates, thanks to strong consumer business in the U.S. and China.
"We see valuation benefiting from favorable sales trends and cost cutting efforts," Agnese said in a research note.
Kurzius said demand is strong both in the consumer segment, in which McCormick sells its products in stores, and the industrial division, which provides flavorings to food manufacturers.
Sales to consumers in the U.S. rose 8 percent, with strong growth in the McCormick and Lawry's brand spices and seasonings and Zatarain's and Kitchen Basics products. Sales of the Grill Mates line increased 6 percent, while sales of gourmet organic spices grew at double-digit rates, Kurzius said during a call with analysts.
The spice maker is benefiting from increased interest in cooking from scratch — especially among millennials — and strong interest in healthier eating as consumers look to reduce salt and sugar by using spices and flavorings, he told analysts.
The company raised its expectations for earnings for per share for fiscal year 2016 to a range of $3.68 to $3.72 per share and now expects sales growth of 3 percent.
McCormick has been able to improve productivity and lower costs, Kurzius said. The company expects savings of $100 million to $110 million this year, part of which will be invested in brand marketing.