What's In Store For McCormick & Co. (MKC) In Q3 Earnings?

McCormick & Co., Inc. (NYSE:MKC) is set to report fiscal third-quarter 2016 results on Sep 30, before the market opens. Last quarter, this global leader in spices and flavors posted a positive surprise of 1.35%.

In fact, the company has delivered positive earnings surprises in three of the last four quarters, making for an average surprise of 1.79%.

Let us see how things are shaping up for this announcement.

Factors to Consider

McCormick has been witnessing rising demand for spices, herbs and seasonings over the last few years. Further, its focus on building sales through buyouts has been driving its earnings. Keeping up the trend of acquisitions, in Apr 2016, McCormick acquired Australia-based Botanical Food Company, the seller of the Gourmet Garden brand of packaged herbs. Gourmet Garden is a global market leader in chilled convenient packaged herbs. In fact, the company has an optimistic view of the third quarter, owing to recent acquisitions and strong sales momentum.

Further, McCormick has been regularly launching products in order to remain competitive. Its increasing focus on higher pricing and cost savings as well as enhancing productivity through its ongoing initiative – the Comprehensive Continuous Improvement (‘CCI’) program – is also encouraging. As a result, the company has raised its 2016 cost savings target, supported by significant productivity improvements, led by its CCI program.

While the company anticipates strong sales growth and further improvement in gross profit margin, additional brand marketing expenses are likely to hurt earnings growth.

Earnings Whispers?

Our proven model does not conclusively show that McCormick is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: ESP for McCormick is 0.00% as both the Most Accurate Estimate and Zacks Consensus Estimate stand at 94 cents per share.

Zacks Rank: McCormick has a Zacks Rank #2 (Buy), which when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Nu Skin Enterprises, Inc. (NYSE:NUS) , with an Earnings ESP of +1.21% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) , with an Earnings ESP of +7.14% and a Zacks Rank #2.

General Mills, Inc. (NYSE:GIS) , with an Earnings ESP of +1.15% and a Zacks Rank #3 (Hold).

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