UBS has concerns about McCormick & Company’s (MKC) long-term consistency; Starts at Sell
By Senad Karaahmetovic
UBS analysts initiated research coverage on McCormick & Company (NYSE:MKC) with a Sell rating and a $71 per share price target.
MKC shares are underperforming in the market after the company issued a weaker-than-expected EPS outlook for FY2023. Along these lines, the analyst has concerns about the company’s long-term consistency.
“We see more risk ahead as the Street seems to be expecting sales and EPS growth to snap back to the company’s LT algo in FY24 despite multiple warning signs, in our view. Some of our key concerns include: (1) widening price gaps, (2) declining volume share, and (3) lower HH penetration,” the analysts wrote in a client note.
“We believe the company has a tough decision on the horizon about balancing market share and profits.”
The analysts also project that M&A will be less of a driving force over the next two years than it has been in the past. They remind investors that 50% of sales growth from 2011-2020 was driven by M&A.
UBS’ EPS estimates for FY23 and FY24 are below the Street.
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