NEW YORK (TheStreet) -- McCormick (MKC) - Get Report , a global leader in spices, seasoning mixes and various food condiments, will report third-quarter fiscal 2015 earnings results Wednesday before the opening bell.
With McCormick shares up nearly 9% on the year to date, climbing 21% over the past year, McCormick has been a flavorful investment, topping the results of both the Dow Jones Industrial Average (DJI) and the S&P 500 (SPX) index during both time periods.
All told, McCormick, headquartered in Maryland, has been a standout performer in a packaged foods sector marred by weak sales and low profit margins. The negative impact of the strong U.S. dollar has devalued the industry's sales in overseas markets. McCormick shares -- at 23 times forward earnings-per-share estimates (of $3.52 for fiscal 2015) --aren't cheap today compared to a forward P/E of 21 for the S&P 500. But you would be wrong to think the seemingly pricey valuation will keep the stock from heading higher.
McCormick has beaten Wall Street's earnings estimates for seven straight quarters. Assuming it does earn $3.52 a share for all of 2015, this would imply more than 4% year-over-year EPS growth above fiscal 2014 actual results of $3.37 a share. And fiscal 2016 average estimates of $3.78 a share would show more than 7% year-over-year EPS growth above 2015. That would translate to growth acceleration of more than three percentage points.
On average, analysts project McCormick to grow earnings at an annual rate of 8% in the next five years. That would mean continued growth acceleration above 2015 (with its projected 4% growth) and 2016 (and its projected 4% growth) levels.
This makes McCormick, which is changing its marketing approach to better appeal to changing consumer spending trends after 120 years in a business, a solid long-term investment, despite its shares trading near all-time highs.
For the quarter that ended August, the average analysts EPS estimates calls for 87 cents a share on revenue of $1.06 billion, compared to the year-ago quarter when its earned 95 cents a share on revenue of $1.04 billion. For the full year, ending in November, earnings are projected to be up 4% year over year to $3.52 a share, while revenue of $4.28 billion would mark a year-over-year increase of 1%.
McCormick, which grew second-quarter revenue by 5% year over year (excluding currency adjustments), continues to benefit from stronger sales volume. It is buoyed by new growth initiatives and is focusing more on what consumers want. Given the company's quarterly string of earnings beats, it would seem management has the right growth formula.
Buying McCormick stock, which pays a 40-cent quarterly dividend for a 2.00% annual yield, looks like a smart move.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.