McCormick & Company, Incorporated MKC reported first-quarter fiscal 2022 results, with the earnings and sales beating the Zacks Consensus Estimate. The bottom line declined year over year while the top line improved.

The year-over-year sales increase reflects strength in the company’s global flavor portfolio and effective pricing actions. The company’s Flavor Solutions gained from the solid performance of packaged food and beverage customers and robust demand from the restaurant and other foodservice customers. The Consumer segment’s sales were impacted by the lapping of increased year-ago demand. However, the segment continues to reflect the sustained shift to higher at-home consumption relative to pre-pandemic levels.

Although McCormick is operating in a highly inflationary environment, it expects to fully offset cost pressures over time via cost savings and pricing actions. The company is on track to capitalize on a sustained shift to cooking more at home, higher digital engagement, clean and flavorful eating and trusted brands.

McCormick & Company, Incorporated Price and EPS Surprise

McCormick & Company, Incorporated price-eps-surprise | McCormick & Company, Incorporated Quote

Quarter in Detail

Adjusted earnings of 63 cents per share declined from 72 cents in the year-ago quarter. The downside stemmed from reduced adjusted operating income. However, the metric surpassed the Zacks Consensus Estimate of 59 cents per share.

This global leader in flavor generated sales of $1,522.4 million, up 3% year over year. This includes an unfavorable impact from currency translation of 1%. Sales from FONA (acquired in December 2020) contributed 1% to sales growth. Strength in the company’s Flavor Solutions segment drove growth. On a constant-currency (cc) basis, sales were up 4%. The top line surpassed the Zacks Consensus Estimate of $1,442 million.

The company’s gross profit margin contracted 220 basis points to 36.8%, thanks to increased cost inflation. These were somewhat countered by cost savings from the Comprehensive Continuous Improvement (CCI) program and favorable pricing.

Operating income was $207 million, down from $236 million reported in the year-ago quarter.

Segment Details

Consumer: Sales went down 2% to $926.1 million, with a negligent impact from foreign currency translation. Performance in the segment reflects pricing actions undertaken to somewhat offset cost inflation. Consumer sales in the Americas increased 2%. Consumer sales in Europe, Middle East and Africa (EMEA) fell 14%. Consumer sales in the Asia/Pacific market decreased by 4%.

Flavor Solutions: Sales in the segment increased 12% (up 14% at cc) to $596.3 million, led by gains from base business, new products and acquisition. The metric includes 2% growth from the FONA buyout. Management highlighted that the segment’s sales gained from differentiated customer engagement, pricing actions undertaken to combat costs and continued demand recovery of away-from-home products. Flavor Solutions sales in the Americas increased 12%, while the metric moved up 15% in the EMEA region. Sales in the Asia-Pacific region rose 3%, driven by higher growth from quick-service restaurants.