McCormick trades higher after margins expand in Q1

McCormick & Company (NYSE:MKC) gained in early trading on Tuesday after posting solid Q1 numbers.

The food company reported sales were up 3% in Q1 from a year ago, including a 1% favorable impact from currency. Constant currency sales growth reflected a 3% increase from pricing actions, partially offset by a 1% volume and mix decline attributable to MKC's strategic decisions to discontinue low margin business and divest a small canning business. Of note, underlying volume and product mix was flat compared to last year.

Gross profit margin expanded 140 basis points as a percentage of sales. The expansion was highlighted to have been driven by favorable product mix, cost savings, global operating effectiveness programs, and pricing actions that were partially offset by cost inflation. Selling, general, and administrative expenses increased from the year-ago period driven by increases in brand marketing as well as research and development investments, partially offset by CCI-led and GOE cost savings.

Adjusted operating income increased 4% from a year ago on a constant currency basis, driven by sales performance and gross margin expansion partially offset by higher selling, general, and administrative expenses. EPS came in at $0.63 vs. $0.59 a year ago and $0.58 consensus.

In terms of guidance, McCormick (MKC) backed its prior outlook for FY24 to be down 2% to flat from FY23 and sees FY24 EPS of $2.80 to $2.85 vs. $2.82 consensus. "We continue to prioritize investments in key categories and executing on the initiatives within our growth levers, including brand marketing, new products and packaging, category management, and proprietary technology," noted CEO Brendan Foley. "We are well positioned with our cost savings programs to fuel investments as well as generate operating margin expansion," he added.

Shares of McCormick & Company (MKC) were up 3.66% in premarket action on Tuesday.