This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

McCormick Is No Longer Too Spicy

NEW YORK ( TheStreet) -- With year-to-date gains of only 8%, McCormick (MKC - Get Report) stock has been a relative underperformer to rivals such as Hormel (HRL) or Campbell Soup Company (CPB), which have posted gains of 48% and 17%, respectively. But in terms of operational improvements, McCormick has been anything but bland.

While the sector's overall performance has been hard to digest, McCormick continues to deliver where it matters most. Not only has management improved McCormick's margins, but the company has posted strong returns on capital. They also compare favorably to other food giants such as Kraft (KRFT) and Mondelez (MDLZ).

McCormick stock was up 20% on the year to a 52-week high of $75.26 in May.  Unfortunately, the shares suffered when the Street then dumped its shopping cart of food companies. At that time the industry was getting burned due to weak growth prospects and poor volumes. Since then, investors have starved for operational improvement.

McCormick bounced back with 8% growth since August, plus better than expected third-quarter earnings results. I see $12 of potential upside on improved international growth prospects, especially in China. The bears will argue the stock is still not cheap enough relative to Nestle (NSRGY). But I believe opportunistic investors should take a bite here. McCormick has all of the ingredients for a sizzling 2014.

McCormick's management has outlined three key growth initiatives: growing the company's base business, becoming more innovative in product development, and expanding the company's brand portfolio and geographical presence through acquisitions.

With revenue growing 4% in the recent quarter, which is more than double the growth output on a sequential basis, I believe management is heading in the right direction. The Street, meanwhile, sees things differently.

Unimpressed by the company's organic growth, some investors raised questions about the effectiveness of management's targeted growth areas such as frozen meals and dry dinners. Some doubted how well McCormick would fare in the face of competitive pressures from Kraft and Nestle, which ramped up their marketing and promotions. The fear is that McCormick will be forced to match these rivals dollar for dollar to gain or even maintain market share.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
MKC $78.53 -0.38%
AAPL $131.47 -0.44%
FB $80.20 -0.43%
GOOG $538.98 -0.15%
TSLA $249.90 1.00%

Markets

DOW 18,094.26 -68.73 -0.38%
S&P 500 2,114.31 -9.17 -0.43%
NASDAQ 5,089.0790 -17.5140 -0.34%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs