McCormick & Co. Inc. (MKC) posted results for the fourth quarter and fiscal 2010. Quarterly earnings came in at 99 cents a share, which surpassed the Zacks Consensus Estimate of 95 cents by 4.2% and the year-ago earnings of 87 cents by 13.8%. The quarterly earnings benefited from a favorable tax rate due to increased foreign tax credits in the U.S. resulting from the repatriation of cash from foreign subsidiaries.
For fiscal 2010, the company posted earnings of $2.75 per share, which was well above the Zacks Consensus Estimate of $2.61.
The spice maker projects fiscal 2011 earnings between $2.80 and $2.85 per share, in line with the Zacks Consensus Estimate of $2.82.
Quarterly Details
For the fourth quarter total revenue grew 5.9% year-over-year to $979.5 million from the year-earlier quarter, benefiting from positive currency translation, higher volume and product mix. Revenues were also above the Zacks Consensus Estimate of $938 million.
For fiscal 2010, revenues grew 4.5% year-over-year to $3,336.8 million versus $3,192.1 million in fiscal 2009. Annual revenues were higher than the Zacks Consensus Estimate of $3,295 million.
The company provided its outlook for sales for fiscal 2011. McCormick expects sales to grow in the range of 5% – 7% in local currency. Based on the current currency translation rate, the sales growth in fiscal 2011 will be positively affected by 1%.
Segments and Margins
Quarterly revenue for the consumer segment jumped 6% year over year due to an extensive distribution channel and the introduction of new products. For fiscal 2010, revenues for the segment grew 4.6%.
For the industrial segment, fourth quarter sales surged 7% annually in the quarter, benefiting from new product launches in each region, favorable volume and product mix with strong increases in all the three regions; namely Europe, the Middle East and Africa (EMEA) region and China. Annual revenue for the segment expanded 4.4%.
Gross margin expanded 10 bps to 45.5% in the quarter compared with 45.6% in the year-ago quarter. Gross margin declined as profits from higher sales and Comprehensive Continuous Improvement program (CCI) cost savings, was largely offset in the quarter by a $7 million increase in brand marketing support and an increase in raw and packaging material costs. Gross margins for the year expanded 90 basis points to 42.5% from 41.6% in fiscal 2009.
To improve productivity and reduce costs, McCormick has been implementing the CCI program and generated savings of $54 million in 2010, which was well above the company’s initial target.
Cash and Balance Sheet
Exiting the year, the company had cash and cash equivalents of $50.8 million, up 28.6% compared with $39.5 million in the prior year. However, the company’s cash flow from operating activities dropped to $387.5 million in the year compared with $415.8 million in the prior year.
McCormick primarily competes with Del Monte Foods (DLM) which is expected to report its fiscal third quarter 2011 earnings on March 3, 2010.
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