Merrill Upgrades McCormick & Co. to Buy

Analyst Leonard Teitelbaum says the spice maker's growth plans are achievable

Merrill Lynch upgraded McCormick & Co. (MKC ) to buy from neutral.

Analyst Leonard Teitelbaum says the maker of spices and specialty foods is targeting revenue growth of 5%, an earnings increase of 10% to 12%, and free cash flow of $100 million annually. Given the proven leadership team and strong business momentum, Teitelbaum believes these goals are achievable, and notes that McCormick's goals are above those of the overall food industry.

He says McCormick has a successful acquisition track record, and that the recent purchase of Zatarain is performing well. He notes first-quarter sales reported Monday were significantly above his estimates. Teitelbaum raised the $1.55 fiscal 2004 (Nov.) earnings per share estimate to $1.57, and upped the $1.70 fiscal 2005 estimate to $1.75. He says the $36 price target represents a 13% appreciation potential from current levels.