Sales Simmer at McCormick, but Higher Costs and Supply Chain Disruptions Take Bites Out of Profits

We don’t intend to materially alter our $63 fair value estimate or long-term outlook (3%-4% organic sales growth and 200 basis points of operating margin expansion to 19%) on wide-moat McCormick after digesting first-quarter results that tracked our full-year expectations. However, shares remain heated, trading at a more than 50% premium to our intrinsic valuation (a lofty low-30s P/E multiple), and we’d suggest investors refrain from building positions.