Contrasting McCormick & Company (MKC) & Farmer Brothers (FARM)

McCormick & Company (NYSE: MKC) and Farmer Brothers (NASDAQ:FARM) are both consumer staples companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, dividends, earnings and risk.

Earnings and Valuation

This table compares McCormick & Company and Farmer Brothers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
McCormick & Company $4.83 billion 2.79 $477.40 million $4.26 24.17
Farmer Brothers $541.50 million 0.84 $24.40 million $0.70 38.29

McCormick & Company has higher revenue and earnings than Farmer Brothers. McCormick & Company is trading at a lower price-to-earnings ratio than Farmer Brothers, indicating that it is currently the more affordable of the two stocks.

Dividends

McCormick & Company pays an annual dividend of $2.08 per share and has a dividend yield of 2.0%. Farmer Brothers does not pay a dividend. McCormick & Company pays out 48.8% of its earnings in the form of a dividend. McCormick & Company has increased its dividend for 31 consecutive years.

Volatility & Risk

McCormick & Company has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500. Comparatively, Farmer Brothers has a beta of 0.48, indicating that its stock price is 52% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for McCormick & Company and Farmer Brothers, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McCormick & Company 1 5 3 0 2.22
Farmer Brothers 0 0 3 0 3.00

McCormick & Company currently has a consensus target price of $111.38, indicating a potential upside of 8.18%. Farmer Brothers has a consensus target price of $35.33, indicating a potential upside of 31.84%. Given Farmer Brothers’ stronger consensus rating and higher probable upside, analysts clearly believe Farmer Brothers is more favorable than McCormick & Company.

Insider and Institutional Ownership

79.2% of McCormick & Company shares are held by institutional investors. Comparatively, 57.3% of Farmer Brothers shares are held by institutional investors. 19.2% of McCormick & Company shares are held by company insiders. Comparatively, 9.2% of Farmer Brothers shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares McCormick & Company and Farmer Brothers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McCormick & Company 16.04% 23.39% 6.49%
Farmer Brothers -3.82% 1.41% 0.70%

Summary

McCormick & Company beats Farmer Brothers on 12 of the 16 factors compared between the two stocks.

McCormick & Company Company Profile

McCormick & Company, Incorporated manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. The company operates through two segments, Consumer and Industrial. The Consumer segment offers spices, herbs, and seasonings, as well as desserts. This segment markets its products under the McCormick, French, Frank's RedHot, Lawry's, Club House, Gourmet Garden, OLD BAY brands in the Americas; Ducros, Schwartz, Kamis, and Drogheria & Alimentari, and Vahiné brand names in Europe, the Middle East, and Africa; McCormick and DaQiao brands in China; and McCormick, Aeroplane, and Gourmet Garden brand names in Australia, as well as markets regional and ethnic brands, such as Zatarain's, Stubb's, Thai Kitchen, and Simply Asia. It also supplies its products under the private labels. This segment serves retailers comprising grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce retailers directly and indirectly through distributors or wholesalers. The Industrial segment offers seasoning blends, spices and herbs, condiments, coating systems, and compound flavors to multinational food manufacturers and foodservice customers. It serves foodservice customers directly and indirectly through distributors. McCormick & Company, Incorporated was founded in 1889 and is based in Sparks, Maryland.

Farmer Brothers Company Profile

Farmer Bros. Co. engages in the manufacture, wholesale, and distribution of coffee, tea, and culinary products in the United States. The company offers roast and ground coffee; frozen liquid coffee; flavored and unflavored iced and hot teas; culinary products, including gelatins and puddings, soup bases, dressings, gravy and sauce mixes, pancake and biscuit mixes, jellies and preserves, and coffee-related products, such as coffee filters, sugar, and creamers; spices; and other beverages comprising cappuccino, cocoa, granitas, and ready-to-drink iced coffee. It sells its products under the Farmer Brothers, Artisan Collection by Farmer Brothers, Superior, Metropolitan, China Mist, Direct Trade, Fair Trade Certified, Rainforest Alliance Certified, Un Momento, Collaborative Coffee, Cain's, and McGarvey brand names, as well as under various private labels. The company serves small independent restaurants, foodservice operators, restaurant and convenience store chains, hotels, casinos, healthcare facilities, gourmet coffee houses, and grocery chains. It distributes its products through direct-store-delivery network, and common carriers or third-party distributors, as well as Website. Farmer Bros. Co. was founded in 1912 and is headquartered in Northlake, Texas.

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