Dj Mccormick & Corporate Inc. Stock Falls Tuesday, Underperforms Market

Aramark ARMK reported fourth-quarter fiscal 2024 results, wherein the top and bottom lines increased year over year. However, revenues came in below the Zacks Consensus Estimate, while earnings matched the consensus mark.

The solid performance was driven by increased volumes in its food, beverage and service offerings to sports and entertainment venues. In fiscal 2024, the company delivered robust financial performance, reflecting double-digit organic revenue growth, higher profitability and margin expansion.

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Aramark Price, Consensus and EPS Surprise

Aramark price-consensus-eps-surprise-chart | Aramark Quote

Aramark’s Quarterly Performance: Key Insights

Aramark delivered adjusted earnings per share (EPS) of 54 cents, up 14% from the 40 cents reported in the year-ago quarter. The metric came in line with the Zacks Consensus Estimate.

Revenues increased 5% year over year to $4,417 million due to solid business base performance and higher volumes across both the U.S. and international segments, along with pricing normalizing from favorable inflation trends in Education. The top line missed the Zacks Consensus Estimate of $4,439 million. Organic revenues rose 7% year over year for the fourth quarter of 2024.

Selling and general corporate expenses declined 12.8% year over year to $65.5 million in the quarter. As a percentage of net sales, SG&A expenses increased 30 bps year over year to 1.5%.

In the fourth quarter of 2024, Aramark’s operating income rose 2% to $219 million. Adjusted operating income witnessed stronger growth, increasing 7% to $271 million. The increase in profitability was driven by higher revenue levels, disciplined cost management and supply chain efficiencies.

Insights Into Aramark’s Segmental Details

Aramark’s FSS United States segment saw revenues increase by 4% year over year, reaching $3,176 million in the fourth quarter of 2024. This growth was fueled by higher per capita spending and strong fan attendance in stadiums within sports & entertainment, increased participation rates and new client acquisition in business and industry, and retail expansion in corrections, including the addition of micro-markets, effectively offsetting the impact of exiting some lower-margin accounts within facilities. Organic revenues also rose 4% year over year.

The company’s International revenues of $1,241 million advanced 9% year over year. The growth was driven by strong performance in the U.K., Germany, Canada and South America. Key industries driving this growth included business & industry, sports & entertainment and extractive services. Organic revenues jumped 16% year over year.

ARMK’s Financial Health Snapshot

Aramark exited the quarter with cash and cash equivalents of $672.5 million, long-term borrowings of $4,307.2 million and total stockholders' equity of almost $3,039 million.

Management approved a new share repurchase program, authorizing the company to buy back up to $500 million of its outstanding common stock. This step reflects the company’s strong capital structure capabilities, which include strategically investing to drive growth, ongoing debt repayment and issuing quarterly dividends.

Management also approved an 11% increase to the quarterly dividend. The new dividend of 10.5 cents per share will be payable on Dec. 12, 2024, to stockholders of record as of Dec. 2.

What is ARMK’s Outlook for FY2025?

For fiscal 2025, ARMK anticipates organic revenue growth of 7.5% to 9.5% compared to the prior year. Adjusted operating income is expected to increase 15% to 18% from the $882 million recorded in 2024. Adjusted EPS is projected to rise 23% to 28% compared to the prior year's figure of $1.55.

This Zacks Rank #3 (Hold) company’s shares have gained 8.8% in the past three months compared to the industry’s decline of 1.2%.

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McCormick & Company, Incorporated MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry. It currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.

Zacks Investment Research

Sprouts Farmers Market, Inc. SFM reached a new 52-week high of $147.21 yesterday, a significant milestone that has caught investors’ attention. The company's ongoing strategic initiatives and favorable economic conditions set a positive tone for its performance, leaving investors pondering whether it's time to buy the stock, hold their positions or take profits.

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McCormick & Company, Incorporated MKC has seen its shares rally 18.3% in the past year, surpassing the industry’s growth of 4.9% as well as the Zacks Consumer Staples sector’s increase of 7.4%. This performance stems from the company’s solid strategic initiatives, which have helped it bolster its position in key markets and core categories.

Let’s take a closer look at the company’s drivers and see if it can continue its growth story.

Strategic Initiatives Driving MKC’s Growth

McCormick’s strategic investments in innovation and distribution expansion are yielding positive results. The company continues to bolster its position across major markets and core categories by focusing on growth levers such as brand marketing, product and packaging innovation, category management and proprietary technology. This innovation-led growth strategy aligns with McCormick’s long-term goal of capturing increased market share in high-growth segments. Apart from this, the company expects its cost-saving initiatives to help fund future investments and drive operating margin expansion.

The company’s year-to-date results, combined with strategic growth plans, reinforce confidence in achieving the mid-to-high range of projected sales growth for 2024, per the third-quarter fiscal 2024 earnings release.

McCormick focuses on saving costs and enhancing productivity through its Comprehensive Continuous Improvement (CCI) program. Starting in 2009, McCormick’s CCI program helped the company to reduce costs and improve productivity. It has used CCI savings to increase investments, leading to higher sales and profits. The company’s third-quarter fiscal 2024 gross profit margin expanded 170 basis points (bps). The upside can be attributed to the improved mix and cost savings from the CCI program.

For fiscal 2024, McCormick is focused on strengthening its volume trends and prioritizing investments to fuel profits. The company’s CCI and Global Operating Effectiveness programs GOE are driving growth investments and operating margin expansion. Management expects adjusted operating income to grow 4%-6% in fiscal 2024, including minimal currency impacts. This is likely to be driven by gross margin expansion, somewhat offset by a major rise in brand marketing investments. The company envisions 2024 adjusted EPS in the band of $2.85-$2.90, which suggests a 5%-7% increase from the year-ago period, including minimal currency impacts.

Flowers Foods, Inc. FLO reported mixed third-quarter fiscal 2024 results, as the bottom line improved year over year and beat the Zacks Consensus Estimate while the top line declined and missed the consensus mark.

This performance reflects the strength of its leading brands, effective cost initiatives and a strategic portfolio approach. Despite top-line pressure from external challenges, the company achieved solid margin improvements and robust bottom-line growth. Flowers Foods outpaced the bread category, with both unit and dollar sales rising in tracked channels, though sweet baked goods and fast-food business sales saw challenges.

Management narrowed its fiscal 2024 guidance to indicate increased certainty as it approaches the fourth quarter. This guidance considers strong performance in the branded retail bread category, partly countered by challenges from shifting consumer and promotional behavior. However, the company expects to witness continued gains from recent business wins and efficiency initiatives.

Flowers Foods’ Quarterly Performance: Key Insights

Adjusted earnings per share (EPS) of 33 cents beat the Zacks Consensus Estimate of 30 cents. The bottom line increased from 29 cents reported in the year-ago quarter.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Flowers Foods, Inc. Price, Consensus and EPS Surprise

Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote

Sales declined 0.7% year over year to $1,191 million due to external factors. The top line missed the Zacks Consensus Estimate of $1,200 million. Price/mix improved 1.7%, implying an optimization in non-retail segments like foodservice. Volumes dropped 2.4%, mainly in cake, foodservice and institutional sales. We estimated the price/mix to be up 0.7% and volumes to decline 0.5% in the third quarter.

Branded retail sales inched down 1.5% to $760.6 million, due to unfavorable price/mix resulting from higher promotional activity and volume declines. Branded cake led the volume drop, though branded bread saw volume growth. The pricing/mix inched down 0.9%, sales volume decreased 0.6%. We anticipated the price/mix and volumes to be up 0.3% and 0.1% in the third quarter, respectively.

Other sales inched up 0.7% to $430 million, driven by favorable price/mix from optimizing the non-retail business, particularly in foodservice, partially offset by volume declines concentrated in vending, foodservice and institutional sales. While pricing/mix improved 4.9%, volume declined 4.2%. We estimated the price/mix to be up 1.5% and volumes to decline 1.5% in the third quarter.

Our model expected Branded Retail sales growth of 0.4% and Other sales to remain flat in the quarter under review.

Decoding FLO’s Costs & Margins Performance

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) contracted 130 basis points (bps) to 50.2% of sales on lower ingredient and packaging expenses, better sales price/mix and reduced product returns. However, this improvement was partially offset by lower production volumes, higher workforce-related and increased purchases of products from external sources.

Selling, distribution and administrative (SD&A) expenses was 38.7% of sales, down 1,170 bps. This can be attributed to significantly reduced legal settlements and related costs, as well as decreased distributor distribution fees, marketing expenses, logistics and freight costs and consulting costs, among other reasons. However, these factors were somewhat offset by higher workforce-related costs, increased rent expenses and lower scrap dough income, among others. Adjusted SD&A expenses was 38.6% of sales, up 20 bps from the year-ago quarter. We had forecasted adjusted SD&A expenses to increase 30 bps to 38.7% of sales.

Adjusted EBITDA climbed 10% to $133.3 million. The adjusted EBITDA margin was 11.2%, expanding 110 bps. We had anticipated an adjusted EBITDA margin increase of 60 bps to 10.7% for the quarter under review.

FLO’s Financial Snapshot

FLO ended its fiscal third quarter with cash and cash equivalents of nearly $15 million and long-term debt of $1,054.1 million. Stockholders’ equity at the quarter end was $1,406.5 million.

Year to date, cash flow from operating activities totaled $282.4 million and capital expenditures were $86.6 million. The company paid out dividends worth $152.5 million during this time.

Sneak Peek Into Flowers Foods' Outlook

For 2024, management now expects net sales in the range of $5.116-$5.147 billion, indicating 0.5% to 1.1% increase year over year. This forecast is revised from the previous guidance of $5.091-$5.172 billion, implying flat to a 1.6% increase year over year.

Adjusted EBITDA is likely to be in the range of $530-$542 million compared with $524-$553 million projected earlier and $501.7 million recorded in fiscal 2023.

For fiscal 2024, adjusted EPS is envisioned in the range of $1.24-$1.28 compared with the earlier view of $1.20-$1.30 and $1.20 delivered in fiscal 2023.

Management expects depreciation and amortization in the range of $155-$160 million, while net interest expenses are likely to be $20-$24 million. For fiscal 2024, capital expenditures are expected to be in the range of $130-$140 million, revised from the previous guidance of $145-$155 million.

The company anticipates that key factors influencing 2024 results within its guidance range include the consumer and promotional environment, the pace of new business growth, the transition of California distribution and the execution of savings initiatives.

This Zacks Rank #3 (Hold) stock has lost 3.9% in the past three months against the industry growth of 0.2%.

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McCormick & Company, Incorporated MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry. It currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.

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