- The Washington Times - Monday, October 2, 2006

Spice maker McCormick & Co.’s stock continued to falter yesterday, losing the short-lived gain it acquired on a positive fourth-quarter forecast late last week.

The Sparks, Md., company’s stock had risen to a new 52-week high Wednesday after the company said it expected 2006 earnings per share to reach $1.45 to $1.48, 4 cents more than the company’s previous estimates.

Net sales rose 6 percent to $663.1 million from $622.7 million a year ago.

“Our initial 2006 goal was to increase earnings per share 8 to 10 percent on a comparable basis with 2005. On this basis, we now expect earnings per share to grow 11 to 12 percent,” said Robert J. Lawless, company president and chief executive officer, in announcing the forecast.

It was enough good news to bring investors to the stock, despite McCormick also reporting that net income for its third quarter ended Aug. 31 fell 10 percent to $43.1 million (32 cents per share) from $48 million (35 cents) a year ago.

Mr. Lawless attributed much of the decline in net income to the cost of closing factories and eliminating jobs in a three-year attempt to boost earnings.

But the $1.24 gain in the company’s stock, which reached a 52-week high of $38.29 Wednesday, was short-lived. Yesterday it lost 23 cents to close at $37.75 on the New York Stock Exchange.

Analysts had mixed reactions to the earnings news.

“McCormick clearly has strong business momentum, in our view, and this momentum appears sustainable over the next several quarters,” said George I. Askew, analyst for Stifel Nicolaus & Co. Inc. in Manassas, citing new packaging and spices in the Americas and growth in the industrial segment.

Mr. Askew does not have a relationship with McCormick, but Stifel Nicholas does investment banking with the spice company.

But Merrill Lynch analyst Eric Serotta downgraded the stock from buy to neutral, saying the company’s turnaround has sent the stock to its full value for the next year.

Merrill Lynch has an investment banking relationship with McCormick.

McCormick put a lot of hope in its $12 million marketing program planned for the fourth quarter, as well as new labels, spice rubs and flip-top containers. It’s the company’s important holiday cooking season — when about 40 percent of sales are made, Mr. Lawless said.

“This will be a record fourth quarter and fiscal year,” he said. “We still have our largest two months ahead of us.”

Fourth-quarter results could take a hit of up to 6 cents per share for advertising costs, Mr. Serotta said.

“We believe that this investment should lay the foundation for sustainable sales and earnings growth,” he added.

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