On Thursday, JPMorgan (NYSE:JPM) adjusted its financial outlook for McCormick & Company (NYSE:MKC), reducing the price target to $60.00 from the previous $62.00. The firm has kept its Underweight rating on the stock. The revision reflects lowered earnings per share (EPS) estimates following the company's disclosure of temporary challenges in its Flavor Solutions segment during a recent industry conference.
The analyst's revised estimates for the second quarter of 2024 are now at $0.58, down from $0.59, which is slightly below the consensus of $0.60. For the full year of 2024, the projection has been decreased to $2.81 from $2.83, compared to the consensus of $2.86 and the company's own guidance of $2.80 to $2.85. Additionally, the forecast for 2025 has been adjusted to $3.00 from $3.03, while the market consensus stands at $3.06.
The new December 2024 price target of $60 takes into account these revised EPS estimates as well as a reduction in multiples across the industry group. Despite the adjustment, JPMorgan acknowledges McCormick's strong market position within global flavors and considers the company a long-term fundamental winner in the food sector.
However, the firm expresses concern about the company's valuation, noting that the stock's multiple is 24 times its estimated earnings for the calendar year 2024, which appears high given the expected organic EPS growth of approximately 7-9% over time. It is worth mentioning that McCormick has not seen its EPS grow more than 7.7% since 2018, which was influenced by the RB Foods acquisition.
In other recent news, McCormick & Company has been the subject of several analyst upgrades. Citi upgraded the company's shares from Sell to Neutral ahead of its second quarter earnings report for fiscal year 2024, with expectations of surpassing consensus estimates. Similarly, Argus shifted its rating from Hold to Buy, reflecting a positive outlook on McCormick's potential to improve sales volumes. Stifel also raised its price target for McCormick based on the company's sales and earnings growth potential.
McCormick reported a robust first quarter, with earnings per share (EPS) of $0.63, a 7% growth surpassing both Stifel and consensus estimates. Despite a challenging macroeconomic environment, particularly in China, the company reported a 2% growth in sales in constant currency terms during its First Quarter Earnings Call.
In other company news, McCormick announced the appointment of Valarie Sheppard, a retired Executive Vice President, Controller, and Treasurer of Procter & Gamble, to its Board of Directors. This addition aligns with McCormick's strategic direction and governance practices. These are recent developments that provide investors with an insight into the company's current activities and future prospects.
InvestingPro Insights
In light of JPMorgan's recent adjustments to McCormick & Company's financial outlook, real-time data and InvestingPro Tips provide additional context for investors. McCormick's commitment to shareholder returns is evidenced by its track record of raising dividends for 38 consecutive years, with the latest data showing a dividend yield of 2.43%. The company also stands out for maintaining dividend payments for over half a century.
InvestingPro Tips suggest caution, as McCormick is trading at a high P/E ratio of 26.61 relative to near-term earnings growth, and its short-term obligations exceed its liquid assets. However, the company's moderate level of debt and a profitable track record over the last twelve months, as shown by a gross profit margin of 37.9% and an operating income margin of 15.6%, provide some balance to these concerns.
For investors seeking a more in-depth analysis, InvestingPro offers additional tips on McCormick & Company, which can be accessed with a 10% discount on a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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