Downgrade by analyst sends McCormick stock on wild ride

May 21, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Sparked by the change of opinion by a stock analyst, the price of McCormick & Co. Inc. went on a roller-coaster ride yesterday, dropping as much as $2 a share before settling at $21.50 a share, down $1.25.

The ride started when Nomi Ghez, a stock analyst for Goldman, Sachs & Co., removed McCormick's stock from the "recommended" list and put it in the "market performer" category -- the equivalent of a hold designation.

In reporting the change, Ms. Ghez said she took the action because McCormick's stock was selling at 16.9 times earnings -- ahead of the 14.7 multiple for the rest of the food industry. She also said she doesn't expect earnings to grow more than 10 or 11 percent this year.

Yet, she noted that she expects the company to perform better (( than other food companies.

"The company is well-managed, and its strong market positions are solid," Ms. Ghez's report said.

Bailey A. Thomas, chairman and chief executive officer of the Sparks- based spice and flavorings company, noted that the stock had been up by $1 on Thursday and that it has traded in the range of $20 to $23 a share for the last three months.

He said Ms. Ghez's assessment may have been a bit bearish because it lumped the company in with retail food companies.

However, 40 percent of McCormick's sales are institutional -- which are to other food companies and fast-food chains. Another 20 percent of sales are in its specialty packaging operation, which makes containers and tubes for cosmetics and vitamins.

"Because of that, I think we will continue to have a good performance," Mr. Thomas said.

After steadily rising for several years, McCormick's stock has been battered in recent years, moving from a high of $28.50 in November 1992 to $21.50 yesterday -- a 24.6 percent drop.

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