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Nov 30, 2019
McCormick Q4 2019 Earnings Report
McCormick reported a sales increase driven by new products and base business growth, with solid performance in both consumer and flavor solutions segments.
Key Takeaways
McCormick reported a 1% sales increase in the fourth quarter of 2019. Earnings per share decreased to $1.59 from $1.60 in the year-ago period. Adjusted earnings per share decreased to $1.61 from $1.67, driven by a higher adjusted income tax rate. The company expects to increase sales year-on-year by 2% to 4% in fiscal year 2020.
Sales rose 1% from the year-ago period, with 2% growth in constant currency.
Earnings per share decreased to $1.59 from $1.60 in the year-ago period.
Adjusted earnings per share decreased to $1.61 from $1.67, driven by a higher adjusted income tax rate.
Cash flow from operations grew 15% to a record $947 million in 2019.
McCormick
McCormick
McCormick Revenue by Segment
Revenue by Segment
Consumer Revenue
CapyFin.comFlavor Solutions Revenue
CapyFin.com Forward Guidance
McCormick expects to grow sales compared to 2019 by 2% to 4%. Operating income in 2020 is expected to range from comparable to an increase of 2% from $958 million of operating income in 2019. McCormick projects 2020 earnings per share to be in the range of $5.15 to $5.25.
Positive Outlook
- The company expects to drive sales growth with new products, brand marketing and expanded distribution.
- Sales growth is also expected to include the impact of pricing, which in conjunction with cost savings, is expected to offset anticipated mid-single digit inflationary pressures.
- The company has plans to achieve approximately $105 million of cost savings and intends to use these savings to improve margins, fund investments to drive continued growth, and as a further offset to increased costs.
- The company expects strong underlying business performance driven by sales growth will continue in 2020.
- For fiscal year 2020, the company projects another year of strong cash flow, with plans to return a significant portion to McCormick's shareholders through dividends and to pay down debt.
Challenges Ahead
- Strong underlying business performance will be more than offset by a significant incremental investment associated with business transformation and a higher projected effective tax rate.
- The company projects that the incremental expenses in 2020 associated with its business transformation investment will reduce growth in operating income by approximately 6%.
- Approximately $8 million of special charges are currently projected for 2020 that relate to previously announced organization and streamlining actions.
- McCormick projects 2020 earnings per share to be in the range of $5.15 to $5.25, compared to $5.24 of earnings per share in 2019.
- The company’s projected earnings per share growth from its strong underlying business performance is more than offset by 2020 incremental business transformation expenses, estimated to be a 7% reduction in growth, and a 3% headwind from an expected increase in the projected effective tax rate to approximately 22%.
Revenue & Expenses
Visualization of income flow from segment revenue to net income