MKC - Embedded Expectations Analysis - 2021 08 02
McCormick & Company, Incorporated (MKC:USA) currently trades near historical highs relative to Uniform earnings, with a 37.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about their long-term guidance, acquisitions, and revenue growth.Specifically, management may lack confidence in their ability to maintain above-benchmark digital marketing rates in EMEA, meet long-term guidance, and sustain revenue growth, particularly in the Flavor Solutions segment. Furthermore, they may have concerns about declines in margins, increasing input cost inflation, and transaction and integration costs related to the Cholula and FONA acquisitions. Moreover, management may also have concerns about the sustainability of demand for their packaged foods products and continued COVID-related costs. Also, they may be exaggerating the incremental impact on sales growth of the Cholula and FONA acquisitions, the excitement of their customers towards the FONA collaboration, and the breadth of reach of their portfolio. Finally, management may lack confidence in their ability to continue capturing momentum in their consumer segment and leverage their sustainability leadership to create new opportunities with FONA customers.
McCormick & Co. manufactures, markets and distributes spices, seasoning mixes, condiments and other flavor products to the food industry- retailers, food manufacturers and foodservice businesses. The company also is partner in a number of joint ventures that are involved in the manufacture and sale of flavor products. The company's business segments comprised of: consumer, in which the company markets its products to customers and supplies private label items, known as store brands; and flavor solutions, which provides a range of flavor solutions including seasoning blends, spices and herbs, condiments, coating systems and compound flavors.
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