Inflation and long-term debt can be a tough recipe as real-money columnist Stephen “Sarge” Guilfoyle sees.
This is especially true for a company he recently reviewed following its latest financial results.
Investors should refrain from buying this spice maker McCormick’s (MKC) – Get the McCormick & Company, Incorporated report shares even though its fiscal first-quarter financial results beat Wall Street estimates, Guilfoyle argues.
“I will not venture into a position by this name, nor will I support one for readers,” he wrote in a recent real money column. “That said, some of you probably already have one.”
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The company recently reported adjusted EPS of $0.63 on revenue of $1.52 billion, beating Wall Street forecasts. Sales increased 2.8% year over year.
McCormick’s gross profit margin fell 2.2% while operating profit fell to $207 million from $236 million in the prior year period.
The problem with McCormick is that his current assets are $2.24 billion while his current liabilities are $3.1 billion with net cash of $338.4 million and inventory of $1. .24 billion dollars. That leaves the company with a ratio of 0.73, which Guilfoyle finds uncomfortable.
“Needless to say, as far as the Sarge test is concerned… This track record is a far cry from even sniffing a passing grade,” he wrote.
McCormick’s advice is a positive factor. The company anticipates sales growth of 3% to 5% compared to the 3.8% estimated by Wall Street. McCormick also estimates adjusted EPS for the year at $3.17 to $3.22 versus Wall Street’s forecast of $3.18 on that measure.