McCormick & Co. Inc. reported double digit-growth in sales and profit in its second quarter, thanks to strong demand from both consumers and food manufacturers and a boost from last year’s purchase of iconic brands Frank’s hot sauce and French’s mustard.
Shares of the Sparks-based spice and flavorings company jumped nearly 8.5 percent to close Thursday at $114.83 each.
Sales soared 19 percent to $1.32 billion during the three months that ended May 31, the company reported Thursday, beating analysts’ estimates by $10 million.
Net income rose to $123.3 million, or 93 cents per share, compared with $100 million, or 79 cents per share, during the same period in 2017.
Adjusted for special charges, earnings rose 24 percent to $1.02 per share, beating analysts’ estimates of 93 cents per share, driven mostly by better-than-expected sales and profit margins.
“McCormick's strong second quarter and year to date results reflect the successful execution of our strategies,” said Lawrence E. Kurzius, McCormick’s president and CEO, in the company’s announcement.
Growth in sales at retailers and to commercial customers such as restaurants and food manufacturers was led by incremental sales in McCormick’s Frank’s hot sauce and French’s mustard portfolio, which added 13 percent to the increase. McCormick acquired the maker of those brands, Reckitt Benckiser Foods, last summer for $4.2 billion. During the second quarter, McCormick added distributors of the two brands in 14 new countries.
“It was a solid quarter, in our view, with the integration of RB Foods on track and healthy sales growth in both its consumer and industrial segments,” wrote Brittany Weissman, a consumer analyst for Edward Jones in St. Louis, in a report Thursday.
She noted that McCormick's plans to achieve at least $105 million in cost savings this year, $5 million more than the original plan, should drive strong earnings growth over the coming year, along with strong sales growth and the folding in of the RB Food acquisitions.
“We were pleased to see McCormick's underlying business show once again strength during the quarter,” Weissman said. “We remain positive on the solid long-term growth of the spice and seasoning categories.”
Kurzius said McCormick is benefiting from increased demand for new and innovative flavorings for cooking and in packaged foods. New products unveiled in stores helped boost sales in the U.S. and China, while sales to food manufacturers and restaurants were driven by new flavorings used for food production and growth at fast-food restaurants in the U.S.
The spice maker’s profit margins were higher than expected, a result of cost savings and from selling more higher-margin products, Weissman said.
The company reaffirmed its outlook for sales and earnings this year. Sales are expected to grow between 13 percent and 15 percent compared to 2017.
Earnings are expected in the range of $6.85 per share to $6.95 per share this year, compared with $3.72 per share in 2017, which includes favorable effect of federal tax reform that Republicans passed in December to lower the corporate tax rate.
On an adjusted basis, earnings per share are expected to be in the range of $4.85 to $4.95, a 14 percent to 16 percent increase from adjusted earnings per share in 2017 that includes a favorable impact of foreign currency rates.