Can McCormick's CCI Savings Maintain EPS Momentum in 2025?

McCormick & Company Inc. MKC is banking on savings from the Comprehensive Continuous Improvement (CCI) program to be a major driver of earnings per share (EPS) growth in fiscal 2025, as highlighted in its third-quarter earnings call. The company’s focus is on improving sourcing, boosting supply chain productivity and enhancing operational efficiency.

These steps are intended to help combat inflation and rising commodity and tariff costs. Despite these cost challenges, McCormick managed to grow its operating profit in the last reported quarter, thanks to careful cost management and ongoing CCI initiatives.

Adjusted operating income rose 2% in the third quarter, largely due to lower selling, general, and administrative (SG&A) costs stemming from CCI efforts. However, this was somewhat offset by increased spending on brand marketing and technology, aimed at driving volume growth and strengthening the brand over the long term.

In the third quarter, the gross margin took a hit, dropping 120 basis points year over year, mainly due to high commodity costs and tariff issues. Some of this pressure was eased by the savings from the CCI program and greater investments in production capacity for future growth. Management expects gross margins to improve in the fourth quarter as it rolls out additional mitigation measures.

For fiscal 2025, McCormick projects adjusted EPS growth of 4% to 6% on a constant-currency basis, fueled by continued volume gains and sustained cost-saving initiatives. Management remains cautiously optimistic about navigating ongoing commodity and tariff challenges through a combination of CCI-led productivity improvements and selective pricing actions, maintaining a balance between volume growth and profitability.

The Zacks Rundown for MKC

MKC, which currently carries a Zacks Rank #4 (Sell), has seen its shares plunge 14.7% year to date compared with the industry’s decline of 14.4%.

From a valuation standpoint, MKC trades at a forward price-to-earnings ratio of 20.23X, higher than the industry’s average 14.56X.

The Zacks Consensus Estimate for MKC’s fiscal 2025 and 2026 earnings implies a year-over-year rise of 2.4% and 6.9%, respectively.

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Some better-ranked stocks have been discussed below:

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The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 2.5% and 167.6%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.

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The Zacks Consensus Estimate for Lamb Weston's current fiscal-year sales indicates growth of 1.3% from the prior-year levels.

Vital Farms VITL packages, markets and distributes shell eggs, butter and other products in the United States. It carries a Zacks Rank #2 (Buy) at present. Vital Farms delivered a trailing four-quarter earnings surprise of 35.8%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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