MCCORMICK & CO INC (MKC) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 was volume-led with organic sales +2% and total net sales +3% to $1.80B; gross margin expanded 20bps to 40.2% while adjusted EPS was $0.80, down from $0.85 YoY due to a higher tax rate and increased SG&A .
• Consumer segment delivered +4% sales to $1.09B with approximately +4% volume/mix; Flavor Solutions rose +1% to $0.71B driven by pricing, but volumes were soft for some CPG and QSR customers .
• FY24 adjusted EPS of $2.95 was above the high end of prior guidance ($2.85–$2.90); FY25 guidance calls for net sales growth 0–2%, adjusted operating income +3–5% (4–6% cc), and adjusted EPS $3.03–$3.08 with FX (-2pts to EPS) and a higher 22% tax rate headwind .
• The Board raised the quarterly dividend 7% to $0.45, marking the 39th consecutive annual increase, and management flagged continued investment in brand marketing and technology (ERP, AI/data hub) as key drivers for FY25 .

What Went Well and What Went Wrong

What Went Well

• Strong consumer execution: “volume and product mix increased approximately 4%” in Consumer, with Americas ~+5% volume growth, outpacing branded peers and private label; holiday execution and LTOs (finishing sugars ~90% sell-through) were standout .
• Margin expansion: Q4 gross margin +20bps, FY24 +90bps, supported by CCI-led savings and mix; Flavor Solutions adjusted operating income +5% in Q4 (+7% cc) and FY24 margin +140bps as portfolio mix shifts toward higher-margin flavors and branded foodservice .
• FY24 delivery vs guidance: Adjusted EPS $2.95 finished above guidance high end; Consumer segment achieved +1% volume growth for the year; leverage ratio reduced to below 3x with strong operating cash flow .

What Went Wrong

• EPS pressure: Q4 adjusted EPS fell to $0.80 (from $0.85) on a higher adjusted effective tax rate (25.4% vs 22.3%) and increased SG&A (technology shift from Q3 and brand investments) .
• China/EMEA headwinds: APAC Consumer declined ~10% organically (China macro weakness); EMEA flavored solutions volumes and QSR traffic remained soft, with geopolitical boycotts impacting some customers .
• JV FX translation: Currency strength of USD vs MXN (~17 to >20) weighed on JV income translation; management expects mid-teens decline in unconsolidated income in FY25 despite strong underlying performance .

Financial Results

Note: Street consensus estimates could not be retrieved at this time due to S&P Global data access limits; estimate comparisons are therefore not included.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “In the fourth quarter, total organic sales increased by 2%, reflecting volume and product mix growth of more than 2%, partially offset by pricing.”
• “Gross profit margin expanded by 20 basis points... driven primarily by the benefit from our comprehensive continuous improvement program, or CCI.”
• “We are stepping up investments... ERP implementation... AI... machine learning capabilities... building a new data analytics hub.”
• “Our 2025 gross margin is projected to range between 50 to 100 basis points higher than 2024... offset by low single-digit cost inflation.”

Q&A Highlights

• Consumer momentum and drivers: Americas volume ~+5%; increased brand marketing, innovation, expanded distribution, price gap management; holiday execution and LTOs supported strong sell-through .
• Guidance framing: FY25 organic sales 1–3% balances China recovery prudence and strength in Americas/EMEA consumer; minimal aggregate pricing expected .
• Pricing strategy: Price gap investments continue at 2024 levels, maintained through Q1; ongoing surgical evaluation of returns .
• Segment margin trajectory: Expect more gross margin contribution from Flavor Solutions (mix shift to flavors/branded foodservice); path to FY28 FS operating margin target .
• Cash flow/inventory: FY24 CFO $922M; strategic commodity buying elevated inventories; similar playbook may be used opportunistically .

Estimates Context

• S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at the time of this analysis due to data access limits. As a result, estimate-based beat/miss comparisons are not included. We will update when SPGI data becomes accessible.

Key Takeaways for Investors

• Volume-led growth and consumer execution underpin the quarter; Americas and EMEA consumer strength, e-commerce acceleration, and holiday LTOs drove performance .
• Margin story intact: CCI and mix delivered Q4/FY gross margin expansion; FY25 guide calls for another 50–100bps of gross margin expansion despite inflation .
• Near-term EPS cadence: Expect Q1 operating profit flat/slightly down on timing shifts (stock comp, price gap investments), offset by stronger Q2 and building profitability through the year—potential trading setup around Q2 inflection .
• Watch macro/geopolitical exposures: China consumer remains a swing factor; EMEA QSR/CPG volumes and boycotts add uncertainty—manage expectations within the 1–3% organic growth range .
• FX headwinds and higher tax rate will mask underlying progress: -2pts to adjusted EPS and ~22% tax rate necessitate focusing on constant-currency EPS (+5–7%) as the cleaner read-through .
• Flavor Solutions profitability improving: Mix shift and pricing are expanding margins; continued execution toward 2028 margin targets supports the medium-term thesis .
• Capital returns: Dividend increased to $0.45; leverage below 3x and strong CFO provide flexibility to fund growth investments and sustain returns .