McCormick’s fourth quarter saw sales growth that surpassed Wall Street expectations, but the market responded negatively given the company’s margin pressures and an earnings shortfall. Management attributed the quarter’s results to higher-than-anticipated commodity inflation and increased tariff costs, which offset efficiency gains and disciplined cost management. CEO Brendan Foley highlighted that while the company achieved volume-led organic growth in both consumer and flavor solutions segments, gross margins were squeezed by external cost headwinds. Foley acknowledged, “Rising costs in the second half related to the dynamic global trade environment pressured gross margins,” and described the external landscape as more volatile than anticipated.
Is now the time to buy MKC? Find out in our full research report (it’s free for active Edge members).
McCormick (MKC) Q4 CY2025 Highlights:
- Revenue: $1.85 billion vs analyst estimates of $1.83 billion (2.9% year-on-year growth, 0.9% beat)
- Adjusted EPS: $0.86 vs analyst expectations of $0.88 (1.8% miss)
- Adjusted EBITDA: $375.8 million vs analyst estimates of $388.3 million (20.3% margin, 3.2% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $3.09 at the midpoint, missing analyst estimates by 3.5%
- Operating Margin: 16.8%, in line with the same quarter last year
- Organic Revenue rose 2.1% year on year (miss)
- Sales Volumes were flat year on year (2.2% in the same quarter last year)
- Market Capitalization: $16.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From McCormick’s Q4 Earnings Call
- Andrew Lazar (Barclays) asked about the drivers behind continued volume momentum, especially in the consumer Americas segment. CEO Brendan Foley emphasized the impact of ongoing innovation, expanded distribution, and targeted pricing, but also cautioned that pricing actions could lead to flat or slightly negative volumes in early 2026.
- Peter Galbo (Bank of America) questioned the drivers behind weaker-than-expected gross margin and the timeline for recovery. CFO Marcos Gabriel explained that gross margin was weighed down by both unexpected commodity inflation and higher tariff costs, and that full recovery may be delayed given ongoing volatility.
- Tom Palmer (JPMorgan) inquired about inflation’s impact on future quarters and the cadence of cost pressures. Gabriel clarified that inflation remained highest in Q4 and is expected to persist at a mid-single-digit rate into 2026, with any improvement likely occurring later in the year.
- Alexia Howard (Bernstein) sought clarity on the timeline for returning to long-term earnings growth targets. Foley stated that while top-line growth targets appear achievable, further work is needed to offset incremental costs before earnings can return to the long-term algorithm.
- Max Comfort (BNP Paribas) requested clarification on the company’s tariff exposure and mitigation efforts. Gabriel detailed that tariff exposure had been halved, but incremental costs for 2026 would still require significant mitigation through productivity and supply chain initiatives.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the effectiveness of pricing actions and innovation in restoring consumer segment volumes, (2) signs of margin expansion as cost-saving and tariff mitigation strategies are executed, and (3) the integration progress and financial impact of McCormick de Mexico. The pace of recovery in key international markets and the ability to manage persistent inflation will also be critical signposts.
McCormick currently trades at $61.86, down from $66.56 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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