McCormick & Company Incorporated

McCormick delivered a disappointing result, failing to meet the analyst consensus with respect to revenues as well as earnings. The management claims that it is seeing an improved momentum given the changing consumer consumption patterns, Flavor Solutions demand, and steady service levels and supply. In Q4, their sales growth was decent in the Flavor Solutions area and kept up momentum across all geographies. In addition, the company is speeding up automation, from individual pieces of machinery to an entirely automated line for a high-volume packing style. The workforce in its American supply chain is expected to be reduced by 10% due to these initiatives. They are also increasing distribution and market share in spices, seasonings and hot sauce as the demand from branded food service restaurants and institutional customers continue to grow. The management intends to maximize demand and streamline cost structure to deliver long-term shareholder value. We give McCormick a ‘Hold’ rating with a revised target price.