McCormick earnings up 63% $15.2 million quarter called further evidence of a turnaround

March 19, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

In another indication of a turnaround, McCormick & Co. Inc. yesterday reported its second straight quarter of earnings growth.

The Sparks-based spice giant said that net income for the quarter that ended Feb. 28 was $15.2 million, up about 63 percent from $9.4 million in the year-ago period.

"We're viewing this very positively," Robert G. Davey, chief financial officer and executive vice president. "This was a business we needed to turn around. We had had five or six down quarters."

Investors drove McCormick's shares up 93.75 cents to $23.75.

"The stock is making a nice move today," said David Nelson, an analyst for NatWest Securities. But he added, "It's still a show-me stock. It took probably a year before the street started turning negative on the company. It may take a year or more before it turns positive."

On a per-share basis in the company's first quarter, earnings increased 67 percent, to 20 cents from 12 cents in the corresponding period last year. McCormick beat analysts' expectations of about 19 cents a share. Net sales in the quarter increased about 3 percent, to $407.4 million from $395.8 million.

McCormick snapped a six-quarter streak of declines in its previous quarter, the fourth quarter of 1996, when earnings increased 8.6 percent.

In this year's first quarter, McCormick had double-digit sales increases in its European and Asian operations, as well as in its packaging and industrial businesses, Davey said.

But North American and food service sales dropped from the year-ago period. Davey said McCormick suffered from comparison with strong U.S. sales in last year's first quarter, when word of a March 1996 price increase boosted sales in February 1996.

McCormick's overall first-quarter results appeared impressive largely because of their comparison with dismal year-ago numbers. In last year's first quarter, McCormick's net income fell by about 50 percent.

"I think this was a good quarter, not a great quarter, because of the comparison against a weak quarter," said R. Bentley Offutt, an analyst with Hunt Valley-based Offutt Securities. "A better indication will come from the first six months of the year. I think then you'll have more of an apples-to-apples comparison."

Davey called the company's numbers "sort of average," compared with the first quarter of two years ago. Still, he said, the results reflected improvement and added to the evidence of a turnaround. "We need to put some numbers on the board," he said.

Davey also said competition has become less intense and that McCormick would continue to drive the company's name and specific product lines with advertising dollars.

Nelson, the NatWest Securities analyst, said, "I think the issue is people believing the turnaround is in place."

If McCormick continues to post strong numbers, he said, "it's not inconceivable that we could see the stock trade at about $30 a share."

Pub Date: 3/19/97

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