McCormick & Company, Incorporated (MKC) Earnings & Analysis

Latest quarter

McCormick reported Q3 FY2026 revenue of $2.0 billion, up 17.4% from $1.7 billion a year earlier. The company reported revenue of $2.0 billion against the consensus of $2.0 billion, or 2.34% above it, while adjusted EPS of $0.86 was 14.7% above the $0.75 consensus.

The filing said the McCormick de Mexico acquisition added 14.6% to quarterly net sales, pricing added 2.2%, and foreign exchange added 0.9%, while volume and product mix reduced sales by 0.3%. Consumer sales increased 24.9%, including 1.1% organic growth, and Flavor Solutions sales increased 7.7%, including 3.0% organic growth. The filing said Consumer volume and product mix declined, while Flavor Solutions volume and product mix increased.

Gross margin was 39.3%, compared with 37.4% a year earlier, as the filing cited the acquisition, pricing and CCI cost savings, partly offset by commodity and freight costs. Operating margin was 10.7%, versus 16.7% a year earlier, while diluted EPS was $0.36, compared with $0.84. McCormick reported free cash flow of $112.1 million, compared with $206.1 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the earnings call, CEO Brendan Foley said McCormick saw improvement in its Americas Consumer business during the third quarter in both shipments and consumption, but said the broader consumer environment differed from the company’s expectations exiting the second quarter. He said softer category unit consumption affected condiments, sauces and certain other categories, while higher beef and seafood prices likely affected recipe mixes and products connected with those proteins. Foley also cited rising gas prices and a consumer focus on value.

Foley told analysts that the company’s U.S. red-cap herbs, spices and seasonings portfolio performed well and that it saw share gains and unit-volume growth there. He said the company was also seeing improvement in Mexican-flavored recipe mixes, but described recipe-mix recovery as taking longer than expected amid competitive activity, retailer distribution changes and value trade-down in selected segments. He said the company was addressing pricing and promotion gaps, shelf execution and retail-media support, while seeking to rebuild core recipe-mix velocity and expand its Mexican-aisle presence.

For the fourth quarter, Foley said price-pack architecture, greater search spending, sharper promotions and assortment actions were expected to have more impact. He said pricing was not expected to turn negative, though its contribution could be lower than year to date. He also said the company was actively mitigating a potential short-term packaging-component supply issue through other packaging formats, and said it would provide more detail on the fourth-quarter call.

CFO Marcos Gabriel said McCormick raised its inflation outlook to about 7%, citing raw and packaging costs, freight costs related to fuel, and U.S. capacity constraints. He said some expenses shifted from Q3 into Q4 and that the company planned trade investments in the fourth quarter to support volume. Gabriel said the company was evaluating currency mix, fixed- versus floating-rate debt and maturity timing as part of its financing approach. He said the company was too early in its planning to provide a formal FY2027 outlook, although it expects inflation to continue into the following year.

Guidance

McCormick maintained its FY2026 outlook for organic sales growth of 1.00% to 3.00%. On the call, Marcos Gabriel said the company raised its FY2026 cost-inflation outlook to about 7%, from its earlier expectation of 60 basis points of gross-margin expansion for the year, and now expects about 120 basis points of gross-margin expansion. Gabriel said McCormick expects about 60 basis points of gross-margin expansion across Q3 and Q4 combined.