Shares of spice maker McCormick haven't been able to gain traction for most of 2018, and to CNBC's Jim Cramer, it all comes back to one analyst report.
In January, Deutsche Bank analysts put a "sell" rating on McCormick's stock in what the "Mad Money" host called a "brutal downgrade." The report alleged slowdowns in the company's spices and seasonings division as well as its then-recently acquired Reckitt Benckiser brands, which included French's and Frank's RedHot.
"They said the legacy McCormick business was poised to lose major market share to private-label competitors, and there would be little to no organic growth to be found," Cramer said. "Basically, they painted a very grim picture, and while, quarter after quarter, McCormick proves this picture dead-wrong, the negative thesis simply refused to die."
Even the company's upside surprise in the first fiscal quarter of 2018, with staggering earnings growth of 31 percent, wasn't enough to sate the bears. The stock opened significantly higher after the report, only to give up most of its gains by day-end.
But McCormick's latest "game-changer" of an earnings report finally managed to lay the bear thesis to rest, Cramer said.
In its fiscal second quarter, the flavor giant saw higher-than-expected earnings per share and revenue, with sales and profit growing by double digits year over year.
More specifically, the businesses Deutche Bank said were decelerating in January showed few signs of weakness, with McCormick's CEO, Lawrence Kurzius, saying he believed Frank's RedHot could be the top hot sauce in the world.
"This was a high-quality beat and everybody knew it," Cramer said. "Finally, the stock got some real lift, surging 8.4 percent that day and then continuing to rally to an all-time high of $120 last week."
But while the "Mad Money" host was pleased to see McCormick's stock get some credit for the company's work, he did notice something strange: for the first time in 2018, McCormick's management did not raise guidance, but the stock still rallied.
"I think a lot of this strength was short covering, but the reason the shorts were forced to cover is that the bear thesis was eviscerated," he explained. "It took a while, but people finally realized that McCormick paid up to buy Reckitt Benckiser’s food division not because they’re morons, for heaven's sake, but because they understood precisely how valuable this business could be."
Cramer did warn that shares of McCormick, which were trading at 22 times next year's earnings estimates on Monday, were getting expensive considering the strong year-over-year earnings comparisons the company would face in 2019.
"But let me give you the bottom line here: McCormick has proven the bears wrong every step of the way and, after languishing for the better part of the year, I think this rally is just getting started as the stock has become the darling of the packaged foods group," he told investors.
WATCH: Cramer explains the breakout in McCormick's stock
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