McCormick & Co. (NYSE: MKC) reported Q4 EPS of $0.79, $0.02 worse than the analyst estimate of $0.81. Revenue for the quarter came in at $1.56 billion versus the consensus estimate of $1.56 billion.

GUIDANCE:

McCormick & Co. sees FY2021 EPS of $2.91-$2.96, versus the consensus of $2.96.

• McCormick is capitalizing on the sustained shift to cooking more at home and the growing consumer interests in clean and flavorful eating, increased digital engagement, trusted brands and purpose-minded practices. These long-term trends have accelerated during the COVID-19 pandemic and are expected to persist beyond the pandemic. The Company expects the shift in consumer demand to at-home consumption to be sustained at higher than pre-pandemic levels, as well as a gradual recovery in the demand from restaurant and other foodservice customers which have been impacted by the curtailment of away from home dining. The strength and diversity of McCormick's product offering is expected to drive continued consistency in performance during volatile times. McCormick is well positioned for continued growth through the combination of its alignment with these consumer trends, the breadth and reach of its flavor portfolio and its effective growth strategies.
• In 2021, the Company expects to grow sales by 7% to 9% compared to 2020, which in constant currency is 5% to 7% and includes the incremental impact of the Cholula and FONA acquisitions. McCormick expects to drive organic sales growth in both its Consumer and Flavor Solutions segments in 2021 driven by brand marketing, new products, category management and differentiated customer engagement.
• Operating income in 2021 is expected to grow by 4% to 6% from $1.00 billion in 2020. The Company anticipates transaction and integration expenses related to the Cholula and FONA acquisitions of approximately $50 million in 2021. In addition, McCormick currently expects approximately $8 million of special charges in 2021 that relate to previously announced organization and streamlining actions. Excluding the impact of transaction and integration expenses as well as special charges in 2021 and 2020, adjusted operating income is expected to increase 8% to 10%, which in constant currency is 6% to 8%. This expected growth range includes strong base business growth and acquisition contribution partially offset by a 4% impact from incremental 2021 business transformation and first-half volume driven COVID-19 expenses.
• McCormick projects 2021 earnings per share to be in the range of $2.71 to $2.76, compared to $2.78 of earnings per share in 2020. The Company expects transaction and integration expenses, including an unfavorable income tax expense impact from a discrete item related to the acquisition of FONA, as well as special charges, to lower earnings per share by $0.20 in 2021. Excluding these impacts, the Company projects 2021 adjusted earnings per share to be in the range of $2.91 to $2.96 which represents an expected increase of 3% to 5%, or in constant currency 1% to 3%. This reflects strong base business growth and acquisition contribution, partially offset by a 4% impact from incremental 2021 business transformation and COVID-19 expenses and a 4% headwind from an anticipated increase in the projected adjusted effective tax rate to approximately 23%. For fiscal year 2021, 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.

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