McCormick (MKC)

Food flavoring company McCormick (NYSE:MKC) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, 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.

Company Overview

The classic red Heinz ketchup bottle’s competitor, McCormick (NYSE:MKC) sells food-flavoring products like condiments, spices, and seasoning mixes.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors of McCormick include Kraft Heinz (NASDAQ:KHC), Nestle (SWX:NESN), and Unilever (NYSE:UL).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $6.79 billion in revenue over the past 12 months, McCormick is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To accelerate sales, McCormick likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, McCormick’s sales grew at a sluggish 2.1% compounded annual growth rate over the last three years, but to its credit, consumers bought more of its products.

This quarter, McCormick reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 1.1%.

Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and suggests its newer products will fuel better top-line performance.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether McCormick generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, McCormick’s average quarterly volume growth was a healthy 1.1%. In the context of its 1.3% average organic revenue growth, we can see that most of the company’s gains have come from more customers purchasing its products.

In McCormick’s Q3 2025, sales volumes jumped 1.2% year on year. This result was in line with its historical levels.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

McCormick has good unit economics for a consumer staples company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 38.3% gross margin over the last two years. That means for every $100 in revenue, $61.65 went towards paying for raw materials, production of goods, transportation, and distribution.

In Q3, McCormick produced a 37.4% gross profit margin, down 1.3 percentage points year on year and missing analysts’ estimates by 3.5%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.

McCormick’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 15.7% over the last two years. This profitability was top-notch for a consumer staples business, showing it’s an well-run company with an efficient cost structure. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, McCormick’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, McCormick generated an operating margin profit margin of 16.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, McCormick reported adjusted EPS of $0.85, up from $0.83 in the same quarter last year. This print beat analysts’ estimates by 4.2%. Over the next 12 months, Wall Street expects McCormick’s full-year EPS of $2.94 to grow 9.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

McCormick has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.4% over the last two years, quite impressive for a consumer staples business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

McCormick historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.8%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

McCormick reported $94.9 million of cash and $4.36 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.31 billion of EBITDA over the last 12 months, we view McCormick’s 3.3× net-debt-to-EBITDA ratio as safe. We also see its $156.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see McCormick narrowly top analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its gross margin missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $68.50 immediately after reporting.

Updated: December 4, 2025 at 9:50 PM EST

When considering an investment in McCormick, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

McCormick isn’t a terrible business, but it isn’t one of our picks. To kick things off, its revenue growth was uninspiring over the last three years. And while its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its projected EPS for the next year is lacking. On top of that, its cash profitability fell over the last year.

McCormick’s P/E ratio based on the next 12 months is 20.5x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $76.92 on the company (compared to the current share price of $63.56).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.