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TheStreet Open House

McCormick Is No Longer Too Spicy

Despite a slight increase in the company's brand marketing expenses, management still increased the company's consolidated operating income by 3% to $148 million. This means the company's Comprehensive Continuous Improvement (CCI) program, designed to cut costs and improve efficiency, is working.

I've spoken quite bit about the importance of organic growth, which measures a company's operational performance using only internal resources and excluding events like acquisitions.

In that regard, I won't deny that much of McCormick's 4% revenue increase was driven by the Wuhan Asia-Pacific Condiments Co. deal, which McCormick announced in May. But this deal falls in line with the three key growth initiatives that management said it would emphasize, including growing the company's geographical presence.

Besides, given the importance placed on product diversification, this deal allows management to kill two birds with one stone -- and I haven't even mentioned the investments McCormick is making in areas like India, where the company is targeting long-term revenue growth of 20% in the next two years. This is on top of the 60% revenue growth McCormick expects to gain in China from the WAPC deal.

All told, I believe McCormick's management, which has consistently raised its dividend, is once again on the right track to return value to shareholders. There was a point when I believed this stock was too spicy for my taste. But with year-to-date gains of only 8%, trailing the S&P 500's gains by 17%, McCormick offers plenty of flavor for investors who want exposure to a packaged food industry that's starting to look quite tasty.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense. His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio. His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.
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