McCormick & Company is another consumer staple which dropped by more than 10% since its’ peak in July 2016. This size of decline for consumer staple companies is now low, but as I wrote in my previous posts (for example about Unilever) it is still not enough for me. Let’s look how situation with MKC looks like.

Reminding:

McCormick & Company was founded in 1889 year and operates in spices, herbs and flavoring business. Company is a global market leader with the most important brands presented below:

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Company is growing both organically and through acquisitions.

Now let’s look at last financial results. First of all we should note, that Company Increased guidance for 2016 adjusted earnings per share to $3.75 – $3.79. Combination of declining share price and increased guidance sounds good, as value is growing and price is declining.

3Q results were strong, but there was no positive market reaction.

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As it comes to valuation (next year consensus):

EV/EBITDA = 16

P/E = 22.5

Dividend yield 2% + repurchasing shares, around 1% annually, altogether 3%, not bad, but could be better.

Valuation is high, but company offers higher growth than peers.

 

Summing up, MKC is a very simple business with strong brands being a competitive advantage (product is a commodity). It is high quality company with long track record of shareholder’s friendly policy. Company offers growth, but I think that valuation it’s either neutral or a little bit too expensive. In both cases it is not a special offer for me J

 

Disclosure MKC – no position