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Volume Growth A Real Positive For McCormick

On Tuesday, McCormick & Company (NYSE:MKC) reported 1Q15 earnings with revenue and EPS well above Wall Street's estimates. MKC has historically disappointed on sales only to show upside on the bottom line, often driven by a lower tax rate than expected.

However, and despite the "guide-down" driven by FX, this was a different quarter. Revenue missed our 2.2% estimate as the upside in Industrial sales was more than offset by the lower Consumer sales revenue. Gross margins were also weaker than expected, weighed down by raw material costs - with management expecting mid-single-digit cost inflation for 2015.

Operating margins also were slightly below what we had been expecting as the Consumer business continues to be weighed by aforementioned materials costs and promotional spending. Adjusted EPS of $0.70 was well above our above-Street estimate driven +$0.04 by a lower tax rate and +$0.01 by a lower share count. Read more