McCormick & Co. (NYSE: MKC) reported Q4 EPS of $1.54, $0.03 better than the analyst estimate of $1.51.

Fiscal Year 2018 Financial Outlook

McCormick is a global leader in flavor - a growing and advantaged business platform. The company expects continued global growth in consumer demand for great taste and healthy eating. McCormick is aligned with consumers\' increased interest in bolder flavors, demand for convenience and focus on fresh, natural ingredients as well as greater transparency around the sourcing and quality of food. Through its growth strategies, the company is well-positioned to meet this increased consumer demand and drive sales of its broad flavor portfolio through brand marketing, new products and expanded distribution.

In 2018, the company expects to grow sales 12% to 14% compared to 2017, including a one percentage point favorable impact from currency rates. The company expects to drive sales growth with the incremental impact of acquisitions completed in 2017, new products, brand marketing and expanded distribution. Sales growth is also expected to include the incremental impact of pricing from 2017 in addition to actions taken in 2018 to offset an anticipated low-single digit increase in material costs. The company has plans to achieve at least $100 million of cost savings and intends to use these savings to improve margins, fund an increase in brand marketing, and as a further offset to increased material costs.

Operating income in 2018 is expected to grow 32% to 34% from $702 million of operating income in 2017. Integration expenses from the RB Foods acquisition of approximately $23 million are currently projected to impact operating income for 2018. Special charges of approximately $18 million are currently projected for 2018 that relate to previously announced organization and streamlining actions. Excluding the impact of transaction and integration expenses as well as special charges in 2018 and 2017, the expected growth in adjusted operating income is 23% to 25% from adjusted operating income of $786 million in 2017. This growth includes an estimated one percentage point favorable impact from currency.

McCormick projects 2018 earnings per share to be in the range of $6.89 to $7.14 compared to $3.72 of earnings per share in 2017. Excluding an anticipated favorable per share impact in 2018 of $2.09 to $2.24, consisting of the estimated net favorable non-recurring impact of the recent U.S. tax legislation, partially offset by the estimated effects of integration expenses related to RB Foods and of special charges, the company projects 2018 adjusted earnings per share to be in the range of $4.80 to $4.90. This is an increase of 13% to 15% from adjusted earnings per share of $4.26 in 2017 and includes the estimated reduction to approximately 24% of our projected underlying effective tax rate associated with the recent U.S. tax legislation. The 13% to 15% projected range of growth in 2018 adjusted earnings per share also includes an estimated one percentage point favorable impact from currency. The impact of favorable currency is expected to be greater in the first half of the year than in the second half. For fiscal year 2018, the company projects another year of strong cash flow, with plans to return a significant portion to McCormick\'s shareholders through dividends and to pay down debt.

GUIDANCE:

McCormick & Co. sees FY2018 EPS of $4.80-$4.90, versus the consensus of $4.70.

Highlights

• For the fourth quarter, sales rose 21% from the year-ago period. In constant currency, the company grew sales 20%, with strong results in both the consumer and industrial segments. Earnings per share increased to $1.32 from $1.24 in the fourth quarter of 2016. Adjusted earnings per share rose 21% to $1.54 from $1.27 in the year-ago period.
• For fiscal 2017, sales rose 10% from the prior year with minimal impact from currency. Operating income was $702 million compared to $641 million in fiscal 2016. Adjusted operating income was $786 million, a 20% increase from $657 million for fiscal 2016, and a 21% increase in constant currency. Earnings per share increased to $3.72 from $3.69 in fiscal year 2016, and adjusted earnings per share rose 13% to $4.26 from $3.78.
• Cash flow from operations grew 24% to a record $815 million in 2017. In November, an 11% increase to the quarterly dividend was authorized, marking the 32nd consecutive year of dividend increases.
• For the 2018 fiscal year, McCormick expects to increase sales year-on-year by 12% to 14%, which includes a one percentage point favorable currency impact. The company expects to achieve earnings per share of $6.89 to $7.14 in fiscal year 2018, including the non-recurring net favorable impact of the recent U.S. tax legislation, compared to $3.72 in 2017. Adjusted earnings per share is expected to be $4.80 to $4.90, which is an increase of 13% to 15% from $4.26 in 2017 and includes an estimated one percentage point favorable currency impact.

For earnings history and earnings-related data on McCormick & Co. (MKC) click here.