November 10, 2008 - McCormick & Co. (MKC-NYSE) a specialty food company, engages in the manufacture, marketing, and distribution of flavor products and other specialty food products to the food industry worldwide. It operates in two segments, Consumer and Industrial.

The Industrial segment sells seasoning blends, natural spices and herbs, wet flavors, coating systems, and compound flavors to food manufacturers and the food service industry through distributors. McCormick & Company was founded in 1889 and is based in Sparks, Maryland.

Even with slower consumer spending at restaurants, MKC is growing earnings, something it's done consistently since 1996 when it reported 52 cents a share. Last year earnings per share (eps) were $1.92. This year analysts predict $2.14 and next year $2.36. Over the last 5 years, eps had average annual growth of 8.35%. Over the next 5, analysts see 10.25% increases per year, on average.

Revenues increased by 9% in the third quarter compared to the same quarter last year, thanks to higher prices, higher volume and favorable foreign exchange rates. In the same quarter, eps went up 11%. Consumers are buying more than ever with the Consumer division showing a 14% uptick in sales for the quarter. Part of the success for the quarter came from the recent acquisitions of Lawry's and Billy Bee honey. The Industrial group revenues moved up only 3% even with volume and product mix decreasing by 5%.

While next year looks to be a tough one in the U.S., analysts see Asia as a bright spot. The Consumer group should see continued strength, thanks to the Lawry's and Billy Bee purchases and price hikes. Weakness will most likely come from the Industrial division due to lower restaurant sales in the U.S. and Europe. But management is not cutting the marketing budget, even with the slowing economy. That should help bolster sales in the upcoming holiday season.

Along with a higher marketing budget is higher commodity prices. While McCormick has been successful so far in passing along these higher costs, it seems unlikely that customers will stand for much more, especially in the U.S. So look for possible margin contraction next year.

Numbers: Market cap is $4.08 billion with 129.99 million shares outstanding and a float of 125.58 million. Institutions own 80% of the stock. The 52 week high was set on August 6 at $42.06. The low was on October 8 at $30.30. Return on equity is an impressive 24%. The Return on Equity for the last 10 years has never gone below 20% and has been as high as 38.3% (in 2000). Book Value is $9.35. Beta is .59. There is an annual dividend of 88 cents for a yield of 2.7%.

McCormick has delivered to shareholders for years. Its high return on equity reflects well on management. Even with a slower economy this company should do well, thanks to an international presence and higher pricing. Commodity costs are a concern, but investors looking for a solid investment will do well to spend more time with this company.

- Company Web site: www.mccormick.com

- Ted Allrich