McCormick & Co. (MKC, Financial) released results for its first quarter of fiscal 2021, which ended Feb. 28, before the market opened on March 30. Both earnings and revenue surpassed Wall Street's expectations as the coronavirus pandemic boosted customer demand for packaged food.
By the numbers
The spices and condiments maker reported adjusted earnings per share of 72 cents, which exceeded the 54 cents reported last year. Revenue of $1.48 billion was up 22% on a year-over-year basis. Analysts had predicted earnings of 57 cents on $1.38 billion in revenue.
The gross profit margin jumped 20 basis points as coronavirus-related expenses were offset by favorable product mix and comprehensive continuous improvement program-led cost savings.
Reflecting on the quarter, President and CEO Lawrence E. Kurzius commented:
"We started the year with outstanding performance and an even stronger outlook for 2021. In the first quarter, we delivered double digit sales, adjusted operating income, and adjusted earnings per share growth. Our differentiated results prove the strength of our business model, the value of our products and our capabilities as a company. We are confident the breadth and reach of our portfolio differentiates McCormick and the successful execution of our strategies will continue to drive long-term sustainable growth."
At the end of the quarter, the company had cash and cash equivalents of $256.1 million. Long-term debt totalled $4.74 billion.
Segment performance
Sales in the consumer segment surged 35% in the first quarter to roughly $947 million, which reflected growth in the Americas as well as the Europe, Middle East and Africa segments, thanks to robust consumer food demand. Sales grew 65% in the Asia/Pacific region, which further contributed to the overall segment growth. Operating income, barring special charges, amounted to $189.9 million, up 59% on fixed cost leverage as a result of higher sales.
In the flavor solutions segment, sales came in at $534.7 million, which was above $512.5 million reported last year. In the Americas and EMEA regions, the company benefited from incremental sales from the FONA and Cholula acquisitions, which contributed a combined 7% to sales growth. This was partially negated by lower demand from restaurants as well as branded foodservice customers. Likewise, flavour solution sales in the Asia/Pacific region were up 26% courtesy of higher sales to quick-service restaurant customers in China and Australia. Operating income in the segment, special charges excluded, stood at $72.6 million, reflecting a decline of 4%. The decline was attributable to higher manufacturing expenses.
Guidance
McCormick has issued guidance for full fiscal 2021. While sales are expected to grow by around 8% to 10% as compared to 2020, adjusted earnings are projected to fall within the range of $2.97 to $3.02.
Disclosure: I do not hold any positions in the stocks mentioned.
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