As a stock, McCormick (MKC) is a clear outlier in the CPG space. In the screen I ran of 25 CPG stocks with a market cap over $10 billion, MKC is one of only two that have provided positive returns (excluding dividends) so far this year - and it's gained a healthy 13% against a 2% gain for Kellogg (K). It's mostly been a bloodbath elsewhere, with (to cite just a few examples) Kraft Heinz (KHC) off 19%+ (even with a recent rally), Hershey (HSY) down 18%, and General Mills (GIS) losing more than a quarter of its value.

And that divergence has only added to the rather large gap in multiples between MKC and other grocery-heavy CPG peers. Just off all-time highs following a well-received Q2 report, MKC trades at 18x the midpoint of FY18 (ending November) EBITDA guidance. KHC is under 14x, and most of the stocks in the space are in the low-teen range.

To support that gap - and a premium multiple - McCormick needs to be a true outlier as a business. It needs to be something close to immune to the pressures facing CPG space: rising input costs (among them freight and labor), private-label competition, and squeezes from retailers trying to protect already-thin margins.

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