Here's our initial take on McCormick's (MKC 5.19%) fiscal 2025 second-quarter results.

Key Metrics

Metric Q2 FY24 Q2 FY25 Change vs. Expectations
Revenue $1.64 billion $1.66 billion +1.2% Met
Earnings per share (Adj) $0.69 $0.69 unch. Beat
Operating income $234.1 million $245.8 million 5% n/a
Gross margin 37.7% 37.5% -20 bps n/a

Flavor Solutions Takes a Step Back, but the Consumer Business Was Better

Spice, flavorings, and seasonings giant McCormick -- and also the company behind Frank's Red Hot and Cholula hot sauces -- continues to navigate a challenging market, and positioning itself to better manage increased tariffs and the potential implications for consumers, with a second quarter that wasn't amazing, but also showed some positive signs.

Overall net revenue was up about 1% year over year, but unlike in prior quarters, it wasn't the company's flavor solutions segment that was doing the heavy lifting. That segment was actually weaker, with revenue down 1%. Realized prices were up 1%, but volume was down 1%, and foreign exchange knocked another 1% off the revenue top line. Things were better in the consumer segment, which is larger and more profitable. Revenue was up 3%, driven by 3% growth in organic sales, along with solid volumes and product mix.

While net income was down 4% on a GAAP basis and adjusted earnings per share came in flat, the operating results were improved. Adjusted operating income was up 10% on an adjusted basis in both segments, and 5% better on a non-adjusted basis across both segments, on lower sales, general, and administrative (SG&A) expenses. Gross margin fell 20 basis points, but higher revenue resulted in a $3 million increase in gross profit dollars. The decrease in gross margin was the result of higher costs related to future capacity growth, and some higher commodity costs.

Immediate Market Reaction

So far, it looks like investors are happy with McCormick's results, and management's commentary for the rest of the year. Share prices are up 5% in early market trading. The jump in price is likely as much a product of the company's guidance as the results from the quarter, as management reaffirmed its full-year outlook, including steps to "mitigate current tariff impact." The company is calling for revenue to grow 1% to 3% on a constant-currency basis for the full year, with volumes driving the growth, and for operating income and earnings per share to increase 3% at the midpoint.

What to Watch

So far, 2025 has been an uncertain year for McCormick, as with so many other companies that rely on foreign markets to source the goods that they manufacture (as well as end-markets where they sell). For McCormick, investors should continue to look for improvements in its expense and cost structure, resilience in the Flavor Solutions segment, and growing volumes in both its Flavor Solutions and Consumer segments as signs of a healthy business moving in the right direction.

Helpful Resources