McCormick & Co. Inc. $36 – New York symbol MKC

MCCORMICK & CO. INC. $36 (New York symbol MKC; Income Portfolio, Consumer sector; Shares outstanding: 115.1 million; Market cap: $4.1 billion; WSSF Rating: Average) is the world’s leading maker of spices, herbs, seasonings, flavorings, sauces and extracts. Top brands include McCormick, Club House, Zatarain’s and Schwartz. McCormick likes to use acquisitions to enhance its product line or expand overseas. For example, it recently agreed to pay $605 million for the Lawry’s and Adolph’s brands of marinades and seasoning. It also agreed to buy Canadian honey producer Billy Bee Honey Products Ltd. for $75 million. These operations generate annual sales of $187 million, and should immediately add to McCormick’s earnings. To put these purchases in context, McCormick earned $254.3 million in the fiscal year ended November 30, 2007, up 9.4% from $232.5 million in 2006. These figures exclude restructuring costs. Pershare earnings rose 11.6%, to $1.92 from $1.72, on fewer shares outstanding. Sales grew 7.4%, to $2.9 billion from $2.7 billion. McCormick’s latest restructuring plan has cut its annual expenses by $45 million. The company expects savings to reach $55 million in fiscal 2008, which is 10% more than its original target of $50 million. The company should earn $2.11 a share in fiscal 2008, excluding the Lawry’s and Billy Bee acquisitions. The stock trades at 17.1 times that estimate. The $0.88 dividend yields 2.4%. McCormick is a buy.

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