Food flavoring company McCormick (NYSE: MKC) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 2.7% year on year to $1.72 billion. Its non-GAAP profit of $0.85 per share was 4.2% above analysts’ consensus estimates.

Is now the time to buy MKC? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

McCormick’s third quarter results came in above Wall Street’s revenue and non-GAAP profit expectations, yet the market reacted negatively due to rising cost pressures. Management attributed the quarter’s top-line growth to continued volume gains in its consumer segment, supported by investments in brand marketing and new product innovation. CEO Brendan Foley highlighted, “Our consumer business continues to drive differentiated performance, really driven by volume,” but noted deceleration in overall food unit growth as a broader industry trend. Gross margin was affected by accelerating commodity costs and newly implemented tariffs, with CFO Marcos Gabriel stating these factors were responsible for about two-thirds of the quarter’s margin compression.

Looking ahead, McCormick’s updated full-year guidance reflects persistent input cost inflation and higher tariffs, with management signaling a cautious outlook on profitability. CFO Marcos Gabriel explained that new and higher tariff rates, combined with ongoing commodity inflation, are driving the need for targeted pricing actions and continued efficiency initiatives. The company expects to offset most, but not all, incremental costs through a combination of productivity savings, supply chain improvements, and “surgical pricing” adjustments. Management emphasized that “not all of our mitigation efforts are permanent,” and that future profitability will depend on their ability to balance volume growth with necessary price increases.

Key Insights from Management’s Remarks

Management credited consumer segment momentum and expanded distribution for the quarter’s performance, while acknowledging margin pressures from external cost drivers and highlighting targeted innovation efforts.

• Consumer volume resilience: Volume-led growth across core categories in the consumer segment outpaced industry trends, particularly in spices and seasonings, where McCormick gained share in the U.S., Canada, France, and Poland. This was supported by increased brand marketing and successful new packaging launches, like the GrillMates refresh.

• Innovation and expanded offerings: The company rolled out new products, including McCormick finishing sugars and the Cholula cremosas and cooking sauces line, which have shown early positive results. In EMEA (Europe, Middle East, and Africa), new air fryer and all-purpose seasonings attracted younger consumers and addressed changing preferences.

• Health and wellness momentum: Growing consumer demand for healthier, high-protein, and functional foods drove reformulation and new product activity, benefiting McCormick’s flavor solutions business. Management cited strong win rates in health-focused product briefs across regions.

• Margin pressure from tariffs and commodities: Gross margin compression was primarily attributed to increased commodity costs and new tariffs, as well as investments in capacity for future growth—especially for the HEAT platform. Management expects these headwinds to continue, with mitigation efforts including cost savings and selective price increases.

• Channel shifts and e-commerce growth: Acceleration in e-commerce and club store sales helped offset softness in measured retail channels. Management noted consumers are willing to pay for value and convenience in digital channels, which now represent a growing share of overall sales.

Drivers of Future Performance

McCormick’s outlook is shaped by ongoing cost inflation, higher tariffs, and the company’s ability to offset these pressures through pricing, efficiency, and innovation.

• Tariff and cost mitigation: Management plans to address $140 million in annualized tariff exposure through productivity savings, alternative sourcing, and targeted (“surgical”) pricing, though they acknowledge not all cost increases can be fully offset. CFO Marcos Gabriel emphasized a bias toward savings over pricing but noted that “some mitigation efforts are not permanent.”

• Volume growth focus: The company aims to sustain volume-led growth in the consumer segment, leveraging continued investment in brand marketing and new product launches. CEO Brendan Foley said the ambition is to “be volume-led in terms of our momentum,” even as necessary price increases are implemented.

• Shifts in consumer behavior: Trends like increased at-home cooking, demand for healthier and value-oriented foods, and the rise of e-commerce are expected to persist. Management believes these trends will support demand for McCormick’s core categories but also require agility in product innovation and channel strategy.

Catalysts in Upcoming Quarters

Looking ahead, StockStory analysts will be monitoring (1) the company’s ability to execute on targeted price increases without sacrificing volume in key categories, (2) the effectiveness of cost mitigation and supply chain initiatives in offsetting ongoing tariff and commodity headwinds, and (3) sustained momentum in new product launches and e-commerce growth. The evolution of consumer preferences toward health, convenience, and value will also be a critical factor.

McCormick currently trades at $65.68, down from $68.30 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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