A spicy beat, with pricing doing work
McCormick turned in its quickest sales increase since 2021 as more shoppers ate at home to stretch their budgets. Third-quarter revenue climbed 17% to $2.02 billion, a touch above analyst estimates of $1.98 billion. Gross profit improved to $794.9 million from $645.1 million in the prior-year period, helped by efficiency moves and the contribution from McCormick de Mexico.
Price hikes that started earlier this year supported the quarter, with organic sales up 2% from a year earlier on pricing. The company said many food makers have been nudged to raise prices this year by higher energy costs and tariffs.
Chief Executive Officer Brendan Foley summed up the consumer backdrop this way: "Consumers continue to look for practical ways to manage their budgets, including using what's already in their pantry, repurposing leftovers and seeking simple, affordable ways to add flavor at home."
What people crave, and where demand is softer
Foley said that the run-up in seafood and beef prices has cooled interest in select spice and seasoning blends, though the consumer side overall has gained from the shift to cooking at home. The consumer division, which includes French's mustard and Old Bay, said the categories it competes in remain "fundamentally healthy" and it expects near-term volume improvement in the Americas.
On the business-to-business side, the flavor solutions unit faced lighter volumes as quick-service restaurant customers pulled back, a dynamic Foley said in prepared remarks was partly attributable to a cyclospora outbreak in the US. The company expects that pressure to stick around for now, though it is also seeing more interest from customers in fast-growing areas such as functional beverages and "better-for-you" snacks.
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Stock check and sector backdrop
Packaged food names have been out of favor lately as higher gas prices and persistent inflation squeezed household budgets. Heading into Thursday's report, McCormick shares were down 32% for the year, while the S&P 1500 Packaged Foods & Meats Index had fallen 10%. The stock was little changed in Thursday's regular session in New York after climbing as much as 7.8% before the market opened.
The company also reiterated that its proposed $44.8 billion purchase of Unilever Plc's food business, which includes Hellmann's, is progressing on schedule and is expected to close in mid-2027. The deal was first unveiled in March and would be the largest ever for both companies.
Costs, outlook, and what to watch for your wallet
Chief Financial Officer Marcos Gabriel said the company now anticipates full-year cost inflation of 6% to 7%, up from an earlier view calling for a mid single digit increase. McCormick also flagged that a shortage of some packaging materials in the Americas could weigh on volumes this quarter. Even so, the company reaffirmed its full-year outlook for net sales to grow between 13% and 17% and for adjusted earnings per share to land between $3.05 and $3.13. Foley added that "disciplined productivity initiatives helped offset rising input and freight costs, supporting margin expansion and enabling continued investment in our brands to drive long-term profitable growth."
For everyday investors, the setup is a mix of resilient demand at home, some near-term pressure from restaurants and costs, and a sizable acquisition still on the horizon. Pricing, productivity, and supply chain wrinkles are the levers to watch.
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