McCormick (MKC) continues to face uncertainty around consumer demand and its pending acquisition of Unilever's (UL) foods business, keeping investor sentiment cautious heading into H2, UBS Securities said Thursday in a report.
Packaged-food companies broadly are navigating a difficult consumer backdrop, with many at risk of downward earnings revisions as shoppers remain price-sensitive and trade-offs persist, the report said. McCormick's demand trends remain hard to predict, and while the company expects sales to improve later in the year, "many are likely to take a wait-and-see approach," UBS said.
Investors are also looking for more clarity on McCormick's planned merger with Unilever's Foods business, with an update expected in September, UBS said. It's uncertain whether that update will be enough to ease concerns about the deal's strategic fit and financial implications, the report said.
McCormick's fiscal Q2 results on Thursday came in ahead of expectations, helped by stronger margins, though the beat did little to change the broader concerns weighing on the stock, UBS said.
UBS raised its price target on McCormick stock to $52 from $51 and maintained its neutral rating.
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