Was McCormick (MKC) a Smart Buy?

Ladies and gentlemen, let me tell you something: McCormick & Company, Incorporated (MKC) has been a hot topic in the investment world, and for good reason. This spice giant has shown remarkable resilience and growth, even in the face of market volatility and economic challenges. But was it a smart buy? Let's dive in and find out!

First things first, let's talk about the numbers. McCormick's stock has been on a rollercoaster ride, but it's one that's worth the thrill. In October 2023, the stock dropped 16% due to uninspiring commentary in a large market. But here's the thing: the stock was trading around $68 per share, which was below its pre-Covid-pandemic levels of roughly $85 per share. This drop presented a golden opportunity for investors to buy at a potentially undervalued price.



Now, let's talk about the company's financial performance. McCormick's stock has shown resilience and growth despite market volatility. For instance, on October 1, 2023, the stock was up 23% year to date, outperforming the S&P 500. This performance indicates that McCormick has been able to deliver better-than-expected sales and earnings, which is a positive sign for investors. In the fourth quarter of 2024, sales increased by 3% from the year-ago period, driven by volume. Earnings per share was $0.80 compared to $0.81 in 2023. Adjusted earnings per share was $0.80 compared to $0.85 in 2023. For fiscal year 2024, sales increased 1% from the prior year, with minimal impact from currency. The sales increase was driven by pricing and volume. Earnings per share of $2.92 compared to $2.52 in 2023. Adjusted earnings per share was $2.95 compared to $2.70 in 2023. Cash flow from operations was $922 million for fiscal year 2024 compared to $1.2 billion in 2023. In November, the Board authorized a 7% increase to the quarterly dividend, marking the 39th consecutive year of dividend increases.

But it's not just about the numbers. McCormick's strong brand presence and strategic investments have enabled it to navigate market challenges effectively. The company's leadership, under Brendan Foley, has done a commendable job in explaining the situation and managing the business effectively. Foley's remarks highlight the company's prioritized investments in core categories to strengthen volume trends, expand operating margins, and drive long-term profitable growth.

Now, let's talk about the market conditions. U.S. government bond yields reaching multiyear highs have been a headwind for the overall market and specifically for McCormick's stock. But here's the thing: this market condition presents an opportunity for investors to buy at a potentially undervalued price. McCormick's stock has been trading close to a once-in-a-decade valuation, which suggests that the stock is undervalued compared to its historical performance and potential for future growth.



So, was McCormick a smart buy? The answer is a resounding YES! Despite facing challenges such as a slower-than-expected economic recovery in China, McCormick has shown resilience and continued to deliver robust earnings growth. The company's strong earnings growth, consistent dividend increases, and resilience in the face of market challenges make it an attractive option for investors seeking stability and growth.

In conclusion, McCormick's stock performance and market valuation compare favorably to other companies in the same sector, supporting the assessment of its investment potential. The company's strong earnings growth, consistent dividend increases, and resilience in the face of market challenges make it an attractive option for investors seeking stability and growth. So, don't miss out on this opportunity to invest in a company that's spicing up the investment world!