McCormick Earnings: Sales and Profit Gains Sprout Up Despite Competitive and Macro Challenges

We don’t foresee a material change to our $63 fair value estimate after McCormick cooked up 6% organic sales growth and 150 basis points of adjusted gross margin expansion to 37% in its fiscal third quarter. However, the market soured on shares, sending the stock down at a high-single-digit percentage clip on the print (which we attribute to softness in China and an unchanged operating income outlook, despite the uptick in gross margins). As such, the stock trades just a touch above our intrinsic valuation; we think investors should keep an eye on this wide-moat name, which rarely trades at a discount to our valuation (not seen since 2017).