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Shares of McCormick & Company, Incorporated (NYSE: MKC ) rose 8% on Tuesday after the company reported first-quarter 2023 earnings results that beat expectations. The spice maker reaffirmed its guidance for the full year 2023 as well. Here are some highlights from the earnings report:
Better results than expected
McCormick reported net sales of $1.56 billion for the first quarter of 2023, which was up 3% year over year and ahead of estimates of $1.54 billion. Sales growth in constant currency was 5%, driven primarily by price action but partially offset by volume declines. Adjusted EPS fell 6% from last year to $0.59 but beat projections of $0.51.
Consumer segment recovery
McCormick’s Q1 results benefited from strong demand for its products even though sales growth during the quarter was impacted by the Kitchen Basics divestiture, COVID-related disruptions in China, and the exit of the company’s Consumer business in Russia.
In Q1, sales in the Consumer segment declined 2% on a reported basis but increased 1% in constant currency, reflecting a 9% increase in price action. Growth in the Consumer segment was driven by the Americas region, which grew sales by 3% during the quarter.
Volume in the Consumer segment is subject to kitchen divestment, low consumption in China due to the pandemic and exit from business in Russia. McCormick expects to grow in the Consumer segment starting in the second quarter of 2023 and continuing due to the exit of its business in Russia and the impact of the closure related to the pandemic in China.
Sales in the Flavor Solutions segment increased 10% as reported and 12% in constant currency, driven by price action. Sales growth in this segment was led by the Americas and EMEA regions, both of which saw double-double sales on a consistent basis.
In the Americas, the company saw strong growth in snack foods driven by new products and core businesses while in EMEA, higher sales to foodservice customers helped drive broad-based growth in the portfolio.
Reaffirms insight
McCormick continues to benefit from the pandemic-induced consumer trend of cooking healthy meals at home. Strong demand for a variety of flavors along with McCormick’s diversified portfolio puts the company in a good position to drive growth.
The company expects net sales to grow 5-7% in FY2023 compared to the previous year, driven mainly by price action, which together with cost savings is expected to offset the impact of inflation. Reported EPS will be between $2.42-2.47 while adjusted EPS is estimated at $2.56-2.61 for the year.
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