Investopedia: High Expectations In Place For McCormick

Spice and seasoning leader McCormick (NYSE:MKC) has some interesting challenges these days. On one hand, the company has a great franchise in its core spice and seasoning business, albeit a franchise that is challenged today with higher input costs and competition from private labels. Likewise, while the company has the potential to grow its business by expanding further into packaged food categories like boxed meals, companies like ConAgra (NYSE:CAG) and General Mills (NYSE:GIS) have demonstrated lately that success in packaged food is hardly easy.

A Solid Second Quarter
Even if this is a tough stretch for food companies, McCormick didn't show any weakness on the top line. Helped in part by currency and pricing, McCormick delivered 11% growth this quarter (8% in constant currency) and beat the high end of the analyst range. Perhaps its a sign of McCormick's brand power that the company was able to register both a 5% boost in pricing and a 3% increase in volume - other companies like General Mills have recently found that price increases usually take a toll on volumes.

While McCormick did offer good news on the top line, profitability was less impressive. The company saw gross margin slide more than a point as input costs took their toll. McCormick captured some of this back through the operating line, and operating income rose more than 12%, but overall the bottom line performance was not so spectacular given the top line outperformance.

To read the full piece, please click below:
http://stocks.investopedia.com/stock-analysis/2011/High-Expectations-In-Place-For-McCormick-MKC-CAG-GIS-KFT-IFF0704.aspx