Here's our initial take on McCormick's (MKC -0.05%) fiscal third-quarter financial report.
Key Metrics
| Metric | Q3 2024 | Q3 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Total revenue | $1.68 billion | $1.72 billion | +3% | Beat |
| Adjusted earnings per share | $0.83 | $0.85 | +2% | Beat |
| Adjusted gross profit margin | 37.5% | 38.7% | -1.2 pp | n/a |
| Adjusted operating margin | 17% | 17.2% | -0.2 pp | n/a |
A Bland Future?
McCormick's fiscal third-quarter results for the period ended Aug. 31 showed relatively stable performance from the spice giant. Net sales were up 3% year over year, with organic growth accounting for 1.8 percentage points and the remainder from the weaker U.S. dollar. Operating income and net income both inched higher as well, with adjusted earnings of $0.85 per share topping expectations by a penny.
CEO Brendan Foley was generally pleased with the results, noting that it was McCormick's fifth straight quarter of growth. The executive lauded McCormick's ability to "capture the demand for flavor and value across all occasions and channels" in making the company better able to grow even under tough industry conditions.
However, McCormick has seen its own costs rise significantly, which showed up in a big hit to gross margin figures. Foley pointed to rising inflation due to higher commodity costs and new tariffs. Cost-savings initiatives are helping to cushion the blow, but McCormick still cut its full-year earnings guidance to a new range of $3.00 to $3.05 per share, down by $0.03 from its past projections and representing annual growth of just 2% to 4% from fiscal 2024.
Immediate Market Reaction
McCormick's results came out on Tuesday morning, Oct. 7, and the stock finished near its lows of the day, down 4%. Investors were understandably disappointed with signs of future weakness, and that outweighed the minimal positive impact of mildly better quarterly results than most of those following the spice company had expected.
Indeed, the move lower only exacerbated a downward trend that we've seen in the stock for several years now. Even though revenue has climbed very slightly in recent years and net income has held relatively stable, McCormick has lost some interest from investors who have preferred companies with more impressive stories of substantial growth.
What to Watch
In the conference call following the release, Foley didn't paint a particularly rosy picture beyond the end of the fiscal year. As he sees it, a challenging environment will keep applying pressure on McCormick's business in fiscal 2026. Still, the CEO believes that healthier behavior and an emphasis on more affordable meals will lead consumers to explore new spices and flavors.
Still, tariffs are set to take a continuing toll on McCormick's profits. The company now believes its annualized exposure will be about $140 million. Investors will want to look closely at mitigation initiatives and how well McCormick finds sources that are cheaper on an after-tariff basis. If the spice specialist can do that while also promoting greater productivity and efficiency, it could lead to tastier results in the future.
