Declining Stock Despite Fair ROE and Decent Financials: Is McCormick & Company Undervalued?

McCormick & Company's (MKC) share price has declined 4.8% over the past three months, but its fundamentals look decent. The company's ROE is 14%, higher than the industry average of 10%, but its earnings growth has been lower than the industry average of 11% over the past five years. This could be due to factors such as high dividend payouts or competitive pressures.

McCormick & Company, Incorporated (MKC) has seen its share price decline by 4.8% over the past three months, despite relatively strong fundamentals. The company's return on equity (ROE) of 14% exceeds the industry average of 10%, indicating robust profitability. However, earnings growth has lagged behind the industry average of 11% over the past five years, which could be attributed to high dividend payouts or competitive pressures.

Tocqueville Asset Management L.P., an institutional investor, reduced its holdings in McCormick & Company by 38.8% during the first quarter, selling 6,630 shares and reducing its position to 10,438 shares valued at approximately $859,000 [1]. This reduction in holdings may reflect concerns over the company's earnings growth prospects.

Despite the recent decline in share price, McCormick & Company reported $0.69 earnings per share for the last quarter, exceeding the consensus estimate of $0.65 [1]. The company also announced a quarterly dividend of $0.45 per share, representing an annual yield of 2.6% and a payout ratio of 62.50% [1]. These dividend payments, while attractive, could be a contributing factor to the slower earnings growth.

Several institutional investors have made significant changes to their positions in McCormick & Company. Select Equity Group L.P. acquired a new position worth $104,863,000 during the fourth quarter, while Balyasny Asset Management L.P. increased its holdings by 47.5% during the same period [1]. These moves suggest that some investors remain bullish on the company's prospects, despite the recent share price decline.

Market analysts have provided a mixed outlook for McCormick & Company. Wall Street Zen raised its rating from "sell" to "hold," while UBS Group initiated coverage with a "neutral" rating and a $83.00 price target [1]. Citigroup and Stifel Nicolaus both cut their price targets, setting them at $77.00 and $76.00, respectively, with "neutral" ratings [1]. The overall average rating for McCormick & Company is "Hold," with a consensus target price of $83.00 [1].

In conclusion, McCormick & Company's recent share price decline can be attributed to mixed fundamentals, including strong profitability but slower earnings growth. While the company's dividend payouts remain attractive, the slower growth rate may be a concern for some investors. The mixed analyst ratings and significant changes in institutional holdings suggest that the market's view of McCormick & Company is divided.

References:
[1] https://www.marketbeat.com/instant-alerts/filing-mccormick-company-incorporated-mkc-shares-sold-by-tocqueville-asset-management-lp-2025-08-18/