McCormick dishes out better-than-expected earnings
Posted
Jun 26 2009, 12:09 PM
by
Louis Navellier
Rating:
Summer is sizzling. What better way to celebrate summer than with an outdoor barbeque? I know I’m using my Alfresco natural gas grill a whole lot more of late. I suspect many of you are doing the same.
And if you're like me you're always looking for ways to bring variety to your grilling. One sure-fire way to mix things up a bit on the fire is to add a great spice rub. You don't have to be a top chef to do it either. These days, you can buy excellent prepared spice rubs for a fraction of what it would cost to prepare your own.
As such, spice is a big growth business in my opinion. It is also a defensive category that should do well while the rest of the economy is struggling.
McCormick & Co. (MKC) is one of my favorite spice manufacturers. This $4 billion plus market cap company dominates the spice market and includes some of my favorite brands, such as Lawry’s, Thai Kitchen and Old Bay.
If you are a crab fan you know what I am talking about. You simply can't cook crabs, crab cakes or even make a decent crab soup without Old Bay.
Yesterday, the company reported earnings that beat expectations. Excluding items, MKC generated a profit of $.42 per share in the quarter ending May 31. Analysts were expecting a profit of $.41.
There is nothing really sexy about MKC, and you won’t get rich owning the stock, but you won’t get burned either. The company pays a dividend yield of 3% that should be consistent, given the defensive nature of the company.
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From a valuation standpoint, MKC trades for just 16 times trailing earnings and 13 times forward earnings. That means the company is growing faster than the current multiple in the market.
In other words, there is more to this stock than defense. There is growth as well.
If you are worried about cash flow or the economy in general, but are looking for better than cash account returns, MKC is a good name to own. I rate the stock a B, or buy.
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