MKC opened this morning at $39.63. So far today the stock has hit a low of $38.16 and a high of $39.64. As of 12:10, MKC is trading at $38.71, up 21 cents(0.5%). The chart for MKC looks neutral and S&P gives MKC a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a December covered call at the $40 level. A covered call is an options position that combines the purchase of stock with the sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.0% return in just 3 months if MCK is above $40 at December expiration. If it is below $40, then we picked up a free $1.10 per share by selling the call. Plus, MKC pays a small dividend that we will receive if we hold the stock on 10/01. McCormick would have to fall by more than 3% before we would start to lose money. Learn more about this type of trade here.
MKC hasn't been below $37.75 (our break-even point) since July and has shown support around $38 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MKC.
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) as investors look for any sign that the housing sector has bottomed (home sales numbers are also due out this week; see below). Analysts surveyed by Thomson Financial anticipate that both companies will report that they narrowed their losses in the most recent quarter.
KB Home's expected $1.25 per share loss, on revenue of $725.5 million, compares to the previous quarter loss of $3.30 and to a year-ago loss of $6.19. However, KB Home's losses in the past few quarters have been deeper than expected. The Los Angeles-based homebuilder's long-range earnings growth forecast is 10.5%, less than the S&P 500. Analysts continue to recommend holding KB Home, and have for at least 120 days. Shares, however, reached a new 52-week high of $31.69 on Friday, and they are up 10.5% year to date.
Lennar is expected to post a loss of 52 cents per share, on revenue of $1.1 billion. That compares to the previous quarter's per-share loss of 76 cents and to a year-ago loss of $3.25. While Lennar also has tended in the past few quarters to miss expectations, the Miami-based company managed a positive surprise in the first quarter of 2008. Lennar's long-range earnings growth forecast is 10.3%, about the same as KB Home's. Analysts also recommend holding Lennar. Friday, shares of Lennar also reached a 52-week high, $27.75, but they are down 6.4% year to date.
There are only a few companies that make brands you are liable to find in the kitchen cupboard, no matter where in the country you look. A 118-year old outfit in Sparks, Maryland is one of them.
McCormick & Company (NYSE: MKC) is a specialty food firm, engaged in the manufacture, sale, and distribution of spices, herbs, seasoning blends and other flavors. The firm's Consumer unit offers products through such retail outlets as Wal-Mart (NYSE: WMT), Safeway (NYSE: SWY) and Target (NYSE: TGT), under such brand names as McCormick, Zatarain, Simply Asia, Thai Kitchens, Club House and Schwartz. The Industrial segment markets to food manufacturers and the food service industry, through distributors. Unilever (NYSE: UL) is a major competitor.
The company pleased investors last week, when it reported Q2 EPS of 35 cents and revenues of $687.2 million. Analysts had been expecting 33 cents and $676.9 million. The CEO attributed the solid performance to increased international sales. Management also guided FY07 to $1.87-$1.91, versus $1.90 consensus. The share price popped on the news and has since been consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys," four "buys" and six "holds." The MKC Price to Sales ratio (1.78), Return on Investment (11.62%) and Return on Equity (22.19%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 67% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $34.80 and $39.82. A stop-loss of $32.85 looks good here.
MOST NOTEWORTHY: Merck & Co (MRK), Intersil Corp (ISIL), Nautilus Group (NLS) and Pacific Sunwear (PSUN) were some of today's more noteworthy upgrades:
Merck & Co (NYSE: MRK ) was upgraded to Neutral from Sell at Goldman Sachs to reflect the company's continued revenue strength and raised guidance. They believe strong execution continues.
JP Morgan upgraded Intersil Corp NASDAQ: ISIL) to Overweight from Neutral based on improving fundamentals.
Matrix USA upgraded shares of Nautilus Group (NYSE: NLS) to Hold from Strong Sell after this week's sell-off.
Pacific Sunwear of California (NASDAQ: PSUN) was added to Freidman Billing's Top Picks List, believing the turnaround is taking hold following strong March comps.
OTHER UPGRADES:
Goldman added L-3 Communications Hlds (NYSE: LLL) to its Conviction Buy List and raised its target to $105 from $95.
McCormick Corp (NYSE: MKC) was upgraded to Outperform from Market Perform at Wachovia citing core performance in both Industrial and Consumer, including a nominal boost in long-term growth outlook.
Bear Stearns upgraded shares of Ventana Medical Systems (NASDAQ: VMSI) to Outperform from Peer Perform, citing the company's solid base business outlook and Symphony potential.
Piper Jaffray upgraded Ocwen Financial (NYSE: OCN) to Outperform from Market Perform.
JP Morgan upgraded TJX Cos (NYSE: TJX) to Neutral from Underweight expecting merchandising initiatives and marketing spending to drive growth.
Tiffany & Co (NYSE: TIF) to report Q4 earnings; conference call at 8:30am. Analysts will evaluate Tiffany's holiday performance, new products and note management's comments on global diamond and jewelry trends.
Boston Scientific Corporation (NYSE: BSX) to hold analyst meeting at 8:30am.
Canon Inc ADR (NYSE: CAJ) to hold shareholder meeting at 10pm.
Tuesday March 27
Goldman Sachs Group Inc (NYSE: GS) to hold shareholder meeting at 9:30am.
McCormick and Company Inc (NYSE: MKC) to report Q1 earnings; conference call at 10am. Analysts will focus on McCormick's consumer segment [largest business], but will also note industrial business line performance, new spices/ingredients and commodity costs.
Wednesday March 28
Teco Energy Inc (NYSE: TE) to provide 2007 outlook; webcast at 8am.
Media Telecommunications & Entertainment Conference 3/28-3/29
Thursday March 29
PDUFA date for Nastech Pharmaceutical Company Inc's (NASDAQ: NSTK) Calcitonin-Salmon Nasal Spray for Osteoporosis.
Friday March 30
Finish Line Inc (NASDAQ: FINL) to report Q4 earnings; conference call at 8:30am. Note that the company issued disappointing guidance earlier this month.
CKE Restaurants Inc (NYSE: CKR), the owner of Carl's Jr. and Hardee's restaurants, to report Q4 earnings; conference call at 9am. Analysts will review the company's same store sales by restaurant chain, average lunch/dinner checks, menu changes and margins. Analysts will also evaluate management's the performance of breakfast offerings, and the company's chain expansion plan.
MOST NOTEWORTHY: Google Inc (GOOG), Office Depot Inc (ODP), Brinker International (EAT) and Kellogg Company (K) were some of today's more notable upgrades:
UBS upgraded Google Inc (NASDAQ: GOOG) to Buy from Neutral with a $560 target on valuation.
Deutsche Bank upgraded shares of Office Depot (NYSE: ODP) to Buy from Hold on valuation, following the recent sell-off.
Brinker International Inc (NYSE: EAT) was upgraded to Neutral from Sell at Goldman Sachs, based on the company's ongoing restructuring efforts.
Kellogg Company (NYSE: K) was also upgraded at Goldman Sachs, to Buy from Neutral, and was added to its America's Buy List.
OTHER UPGRADES:
Lehman upgraded Joy Global Inc (NASDAQ: JOYG) to Overweight from Equal-Weight as they believe the recent sell-off has created a buying opportunity.
Bank of America upgraded Clear Channel Communications Inc (NYSE: CCU) to Buy from Neutral with a $42 target to reflect their belief that activist shareholders will push for value creation rather than a sale to private equity.
Wachovia upgraded McCormick & Schmick's Seafood Restaurant (NASDAQ: MSSR) to Outperform from Market Perform.
BB&T upgraded Universal Truckload Services Inc (NASDAQ: UACL) to Buy from Hold on valuation.
Lehman upgraded Deere & Company (NYSE: DE) to Overweight from Equal-Weight, with a $135 target. Lehman has increased confidence around the durability of higher agricultural commodity prices as well as the company's ability to turn elevated end market demand into stronger margins, earnings, and free cash flow.
I've just returned from the World Money Show, where some 10,000+ investors gathered to learn about global investing. I had a chance to meet with many of the advisors who were featured at the show, and I am highlighting some of their favorite investment ideas. To view all of the stocks featured in this special global report, click here.
Although based in Maryland, McCormick and Co. (NYSE:MKC) is indeed a global play. Vahan Janjigian says, "McCormick is the largest global supplier of spices, herbs, and seasonings. Its products are sold in nearly 100 countries."
Individual brands, he notes, include McCormick and Zatarain's in the U.S. and Mexico, Schwartz in the U.K., Ducros in France, Club House in Canada, and Silvo in the Netherlands.
The quantitative analyst and editor of The Forbes Growth Investor explains, "The consumer segment, which generated 55% of first nine months sales, makes, markets, and distributes to grocers, supermarkets, mass merchandisers, drug stores, and other retail outlets.
"The industrial segment supplies the food service industry and food manufacturers with compound flavors. Customers include almost all major American service restaurants and food companies.
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders 
had been expecting 33 cents and $676.9 million. The CEO attributed the solid performance to increased international sales. Management also guided FY07 to $1.87-$1.91, versus $1.90 consensus. The share price popped on the news and has since been consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
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