McCormick & Company (NYSE:MKC) released its fourth quarter earnings that were slightly better than the estimates and although this is good news for the investors, the investors are still keen to know about the company’s guidance for 2015. The adjusted EPS of the company was at $1.16 just $0.02 ahead of the estimates. The CEO of McCormick (NYSE:MKC), Alan Wilson, said that the brilliant results produced by the company’s joint venture in Mexico and a lower tax rate helped the company achieve a better performance.
However the bad news is that the company’s operating income and sales were actually below projections for the quarter. The CEO gave two main reasons for the decline. McCormick (NYSE:MKC) wasn’t able to make enough sales from quick customers in China and secondly the competition in the market had increased. The CEO then explained the results for the whole year. He said that McCormick (NYSE:MKC) achieved its sales target for the year and the cost decreasing target was also exceeded.
However, McCormick (NYSE:MKC) adjusted growth of operating income came as below expectations at 3% instead of 6%-8%. The main reason was the quick growth of McCormick & Company (NYSE:MKC) in International markets but a slow growth in its profitable U.S market. To summarize the results it is clear that the company’s fourth quarter report was in line with the yearly result. There is a lot of pressure to increase sales and there is weak demand from industrial consumers.
Consumer segment carries a lot of importance for McCormick (NYSE:MKC) and this can be seen from the fourth quarter results as the consumer segment generated 66% of total sales and had an operating income margin close to 22%. This was three times higher than the industry segment’s operating margin of about 7.5%. Keeping all this in mind, the decreasing sales in the consumer segment is a threat for McCormick & Company (NYSE:MKC).
The CEO said that competition has increased because U.S retailers are selling the products of smaller brands as well. These smaller brands are also offering good quality products and it has led to increased competition for McCormick & Company (NYSE:MKC). Although sales in both the segments are decreasing but McCormick (NYSE:MKC) has still managed to get good operating margins on its products. The management of McCormick & Company, Incorporated (NYSE:MKC) believes that innovation would provide it the edge that it needs.
The CEO said that innovation would play a strong front in the 2015 projected sales. He further added that according to him McCormick & Company, Incorporated (NYSE:MKC) is now in a much better position than it was a year back due to more marketing and product development. McCormick (NYSE:MKC) currently has 3% domestic sales and expects this percentage to increase to 4% to 6% in 2015. Now whether McCormick & Company (NYSE:MKC) will achieve its targets and will benefit from product innovation is a question that only time will answer.