If you are looking for high-return consumer food businesses, you’ve likely come across both fast-food giant McDonald‘s and the spice and flavorings specialist McCormick . They don’t compete in the same niche, but these companies share attractive investment characteristics like global industry leadership, impressive profitability, and growing dividend payouts.
Their stocks have stuck close to the broader market’s return into late 2020, suggesting that Wall Street doesn’t see a clear reason why one might outperform the other over the next few quarters. But there are a few factors that point to McCormick as the better share purchase today.
Better industry dynamics
McDonald’s came into the pandemic with a slightly stronger growth profile, growing at a 6% clip in 2019, compared to McCormick’s 3% uptick. But the coronavirus has reshaped the two companies’ relative prospects. McCormick has raised global sales by 6% through the first three quarters of 2020 while boosting adjusted operating income by 9%. McDonald’s has endured a 12% sales decline in that time while operating income is down 23%.
Sure, most of that pressure will disappear as vaccines help eliminate the pandemic risk over the next few quarters. The fast-food giant even returned to growth in the core U.S. market despite simmering outbreaks in many parts of the country.
