McCormick & Company ( NYSE: MKC ) was upgraded to a Buy-equivalent rating at Bernstein despite an earnings disappointment and steep drop for the stock on Thursday.
The firm’s analysts indicated that the company should recover over the long term, leaving the current valuation attractive even if the 2023 outlook is clouded. In Bernstein’s view, the worst for McCormick is behind it, with cost-savings plans expected to boost earnings into the year.
“Going forward we expect $160M in cost savings in 2023 to combine with a catch up in pricing versus input costs (which was a meaningful headwind last year) to create steady sequential improvement in margin trends over the course of the year,” the team projected. “So even though pressure will drive further margin declines in 1Q:23, they will be down by less than this quarter and by 2H:23 we should start to see decent margin recovery.”
Bernstein boosted its rating to Outperform from Neutral and assigned the stock a $90 price target. Shares of the spice and seasoning company rose modestly in premarket trading on Friday.
Read more on McCormick’s earnings results .
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Bernstein sees opportunity in McCormick's post-earnings plunge