S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
Reclusive trader scores 20 years of winning trades. Learn how. (Ad)pixel
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief

It’s Time To Rotate Out Of McCormick & Company

It’s Time To Rotate Out Of McCormick & Company

High-Quality McCormick & Company Isn’t The Best Defensive Buy

McCormick & Company (NYSE: MKC) is a high-quality consumer staple stock and a healthy dividend payer so it should be a good defensive play for the times. The problem is that McCormick & Company is among the highest-valued consumer staples on the market and it pays one of the lowest dividends. While investors with no exposure to the Consumer Staples group may be interested in McCormick & Company for its safety and yield we’re not. We’re not interested because there are some much better plays for investors to sink their teeth into. Near the top of the list is General Mills (NYSE: GIS) which trades at a much lower valuation and pays almost double the yield and it issued favorable guidance as opposed to the very weak outlook provided by McCormick. 

Headwinds Mount For McCormick & Company 

McCormick & Company had a decent quarter despite mounting headwinds, the problem is the results are tepid even with the adjustments, and lost revenue is not expected to be recouped. The company reported $1.54 billion in net revenue for a decline of -1.3% versus last year which missed the consensus mark by 430 basis points. The company estimates COVID lockdowns in China, the war in Ukraine, and escalating supply chain challenges cost them 400 basis points in revenue which is OK news but not enough to offset the miss. The bad news is that escalating costs intensified toward the end of the quarter and cut more deeply into the bottom line than was expected. 


Moving on to the margin, the company reported a 32% decrease in the adjusted operating margin that is largely due to input cost increases. This left the adjusted earnings at $0.48 or down 30% YOY and $0.17 or 2600 basis points worse than the Marketbeat.com consensus and the guidance is no better. The company is expecting to see revenue and margin improvement in the back half of the year as pricing increases take hold but the outlook is still tepid relative to expectations. The company is looking for revenue growth in the range of 3% to 5% versus the 4.25% consensus estimate and for EPS in the range of $3.03 to $3.08 versus $3.16. In our view, with inflation on the rise, we think the company may have a hard time improving its margin without a significant increase in prices. 

McCormick’s Dividend Is Safe, General Mills Is Attractive 

McCormick pays a safe dividend yielding about 1.7% with share trading at 27.5X the earnings outlook. The payout is only 46% of earrings and has been raised for the last 35 consecutive years so we are not expecting a suspension or even a cut. We are expecting to see the distribution increase but at a smaller CAGR than the 9% it has been running, unlike General Mills which just raised its payout and at a higher than expected pace. Trading at only 18X earnings and yielding 3.0% with an equally safe payout, we find General Mills to be much more attractive and price action suggests the market aggress with us. 

The Technical Outlook: McCormick & Company May Have Hit Bottom 

The price action in McCormick & Company may have hit a bottom but we aren’t betting on a rebound. The price action fell more than 5.0% in the wake of the report and is forming a possible Hammer Doji but the session isn’t closed. If the market confirms this bottom it may move sideways over the next few months, unlike General Mills which is poised to rally. General Mills advanced 5.0% in the wake of its report and it is trading at a new high. Assuming General Mills experiences a price-multiple expansion to a level consistent with the current Consumer Staples leaders, it could advance 50% or more while McCormick & Company wallows at its current levels. 

It’s Time To Rotate Out Of McCormick & Company

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
McCormick & Company, Incorporated (MKC)
2.691 of 5 stars
$71.27-3.0%2.08%28.17Hold$93.25
Compare These Stocks  Add These Stocks to My Watchlist 

Should you invest $1,000 in McCormick & Company, Incorporated right now?

Before you consider McCormick & Company, Incorporated, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and McCormick & Company, Incorporated wasn't on the list.

While McCormick & Company, Incorporated currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Thomas Hughes

About Thomas Hughes

Contributing Author: Technical and Fundamental Analysis

Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.
Contact Thomas Hughes via email at tmhughes.writeon@gmail.com.
Free Email Newsletter

Complete the form below to receive the latest headlines and analysts' recommendations for your stocks with our free daily email newsletter:

Most Read This Week

Recent Articles

Search Headlines:

Latest PodcastFed Raises Rates: 3 Stocks to Watch Newmont Mining, Walmart, AMC

Axel Merk, President and CIO of Merk Investments has three very different stocks he frames within the current market and economic conditions.

MarketBeat Resources

Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau MarketBeat is rated as Great on TrustPilot

© American Consumer News, LLC dba MarketBeat® 2010-2022. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | contact@marketbeat.com | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Privacy Policy | Do Not Sell My Information | RSS Feeds

© 2022 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart's disclaimer.