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McCormick's Q3 earnings rose to 85 cents per share, exceeding last year's level of 83 cents.
Net sales climbed 3% to $1.72 billion, fueled by volume and pricing gains across both segments.
The company lowered 2025 profit guidance due to higher commodity costs, tariffs and currency headwinds.
McCormick & Company, Incorporated (MKC - Free Report) reported third-quarter fiscal 2025 results that reflected continued volume-led growth and resilience in a challenging cost environment. Both earnings and sales increased year over year and surpassed the Zacks Consensus Estimate.
Adjusted earnings of 85 cents per share improved from 83 cents in the year-ago quarter and exceeded the Zacks Consensus Estimate of 81 cents. The increase was driven by higher operating income and disciplined cost management, partially offset by a soft gross margin due to rising commodity costs and tariffs.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
The global flavor leader generated net sales of $1,724.9 million, up 3% year over year, including a 1% positive currency impact. The top line beat the consensus mark of $1,715 million. Organic sales grew 2%, led by volume growth of greater than 1%, as well as a 1% contribution from pricing.
The gross profit for the quarter was $645.1 million compared with $649.9 million recorded in the prior year, while the gross margin contracted 130 basis points to 37.4%. The adjusted gross margin contracted 120 basis points, stemming from elevated input costs tied to commodity inflation, tariffs and investments in capacity expansion. These were partly compensated by savings from McCormick’s Comprehensive Continuous Improvement (“CCI”) program.
Adjusted operating income increased 2% to $294 million, reflecting efficiency gains and lower SG&A expenses from benefit costs and streamlining initiatives. These benefits were partially offset by ongoing investments in brand marketing and technology.
Decoding MKC’s Segmental Performance
Consumer: The segment’s sales advanced 4% year over year to $973 million, including a 1% positive currency impact. Organic sales grew 3%, backed by improved volume and mix. Adjusted operating income rose 4% (up 3% in constant currency) to $194 million, reflecting higher sales and reduced SG&A expenses, partly offset by higher commodity costs and tariffs.
Flavor Solutions: Sales rose 1% to $752 million, with minimal currency impact. Organic sales inched up 1% on pricing. Adjusted operating income dipped 2% to $100 million, pressured by higher input costs and tariffs, though partly cushioned by pricing actions and lower SG&A costs.
MKC’s Financial Health Snapshot
McCormick ended the quarter with cash and cash equivalents of $94.9 million, long-term debt of $3.1 billion and total shareholders’ equity of $5.8 billion.
Year-to-date operating cash flow stood at $420.2 million. The company continues to expect robust cash generation for fiscal 2025, supported by profit and working capital initiatives, and aims to return a significant portion to shareholders via dividends.
What to Expect From MKC in 2025?
McCormick reiterated its sales growth view for fiscal 2025 while lowering profitability guidance to account for rising commodity costs and incremental tariffs. The company continues to expect net sales growth of 0-2% (1-3% in constant currency or cc), reflecting ongoing volume-led momentum and a gradual recovery in China.
The gross margin expansion is likely to be impacted by elevated commodity costs stemming from global trade uncertainty and tariffs. SG&A gains from MKC’s CCI program are likely to be partly offset by brand marketing and digital investments.
Adjusted operating income is now projected to rise 2-4% (up 3-5% at cc) compared with the prior 3-5% (4-6% at cc) forecast.
The Zacks Rank #4 (Sell) company now expects adjusted EPS between $3.00 and $3.05, suggesting 2-4% year-over-year growth or 4-6% growth at cc. The bottom line was earlier expected to range between $3.03 and $3.08, indicating 3-5% year-over-year growth or 5-7% increase at cc.
McCormick anticipates a 22% effective tax rate for 2025 compared with 20.5% last year and expects volatile foreign currency movements to hurt sales and adjusted operating income by 1% each, and EPS by 2%.
Shares of MKC have tumbled 12.5% year to date compared with the industry’s decline of 8.1%.
The Zacks Consensus Estimate for United Natural’s current fiscal-year sales and earnings indicates growth of 2.4% and 167.6%, respectively, from the prior-year levels. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.
Smithfield Foods, Inc. (SFD - Free Report) produces packaged meats and fresh pork in the United States and internationally. It sports a Zacks Rank #1 at present. SFD delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Smithfield Foods’ current fiscal-year sales and earnings indicates growth of 7.1% and 28.7%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) packages, markets, and distributes shell eggs, butter and other products. It carries a Zacks Rank #2 (Buy) at present. VITL delivered a trailing four-quarter earnings surprise of 35.8%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales and earnings implies an increase of 27.3% and 14.4%, respectively, from the prior-year levels.
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McCormick Lowers Profit View Despite Q3 Earnings & Sales Beat
Key Takeaways
McCormick & Company, Incorporated (MKC - Free Report) reported third-quarter fiscal 2025 results that reflected continued volume-led growth and resilience in a challenging cost environment. Both earnings and sales increased year over year and surpassed the Zacks Consensus Estimate.
Adjusted earnings of 85 cents per share improved from 83 cents in the year-ago quarter and exceeded the Zacks Consensus Estimate of 81 cents. The increase was driven by higher operating income and disciplined cost management, partially offset by a soft gross margin due to rising commodity costs and tariffs.
McCormick & Company, Incorporated Price, Consensus and EPS Surprise
McCormick & Company, Incorporated price-consensus-eps-surprise-chart | McCormick & Company, Incorporated Quote
The global flavor leader generated net sales of $1,724.9 million, up 3% year over year, including a 1% positive currency impact. The top line beat the consensus mark of $1,715 million. Organic sales grew 2%, led by volume growth of greater than 1%, as well as a 1% contribution from pricing.
MKC’s Quarterly Performance: Key Metrics & Insights
The gross profit for the quarter was $645.1 million compared with $649.9 million recorded in the prior year, while the gross margin contracted 130 basis points to 37.4%. The adjusted gross margin contracted 120 basis points, stemming from elevated input costs tied to commodity inflation, tariffs and investments in capacity expansion. These were partly compensated by savings from McCormick’s Comprehensive Continuous Improvement (“CCI”) program.
Adjusted operating income increased 2% to $294 million, reflecting efficiency gains and lower SG&A expenses from benefit costs and streamlining initiatives. These benefits were partially offset by ongoing investments in brand marketing and technology.
Decoding MKC’s Segmental Performance
Consumer: The segment’s sales advanced 4% year over year to $973 million, including a 1% positive currency impact. Organic sales grew 3%, backed by improved volume and mix. Adjusted operating income rose 4% (up 3% in constant currency) to $194 million, reflecting higher sales and reduced SG&A expenses, partly offset by higher commodity costs and tariffs.
Flavor Solutions: Sales rose 1% to $752 million, with minimal currency impact. Organic sales inched up 1% on pricing. Adjusted operating income dipped 2% to $100 million, pressured by higher input costs and tariffs, though partly cushioned by pricing actions and lower SG&A costs.
MKC’s Financial Health Snapshot
McCormick ended the quarter with cash and cash equivalents of $94.9 million, long-term debt of $3.1 billion and total shareholders’ equity of $5.8 billion.
Year-to-date operating cash flow stood at $420.2 million. The company continues to expect robust cash generation for fiscal 2025, supported by profit and working capital initiatives, and aims to return a significant portion to shareholders via dividends.
What to Expect From MKC in 2025?
McCormick reiterated its sales growth view for fiscal 2025 while lowering profitability guidance to account for rising commodity costs and incremental tariffs. The company continues to expect net sales growth of 0-2% (1-3% in constant currency or cc), reflecting ongoing volume-led momentum and a gradual recovery in China.
The gross margin expansion is likely to be impacted by elevated commodity costs stemming from global trade uncertainty and tariffs. SG&A gains from MKC’s CCI program are likely to be partly offset by brand marketing and digital investments.
Adjusted operating income is now projected to rise 2-4% (up 3-5% at cc) compared with the prior 3-5% (4-6% at cc) forecast.
The Zacks Rank #4 (Sell) company now expects adjusted EPS between $3.00 and $3.05, suggesting 2-4% year-over-year growth or 4-6% growth at cc. The bottom line was earlier expected to range between $3.03 and $3.08, indicating 3-5% year-over-year growth or 5-7% increase at cc.
McCormick anticipates a 22% effective tax rate for 2025 compared with 20.5% last year and expects volatile foreign currency movements to hurt sales and adjusted operating income by 1% each, and EPS by 2%.
Shares of MKC have tumbled 12.5% year to date compared with the industry’s decline of 8.1%.
Food Stocks to Consider
United Natural Foods (UNFI - Free Report) engages in the distribution of natural, organic, specialty, produce, and conventional grocery and non-food products. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for United Natural’s current fiscal-year sales and earnings indicates growth of 2.4% and 167.6%, respectively, from the prior-year levels. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.
Smithfield Foods, Inc. (SFD - Free Report) produces packaged meats and fresh pork in the United States and internationally. It sports a Zacks Rank #1 at present. SFD delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Smithfield Foods’ current fiscal-year sales and earnings indicates growth of 7.1% and 28.7%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) packages, markets, and distributes shell eggs, butter and other products. It carries a Zacks Rank #2 (Buy) at present. VITL delivered a trailing four-quarter earnings surprise of 35.8%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales and earnings implies an increase of 27.3% and 14.4%, respectively, from the prior-year levels.