The Marzetti Company (MZTI)

Specialty food company The Marzetti Company (NASDAQ:MZTI) announced better-than-expected revenue in Q3 CY2025, with sales up 5.8% year on year to $493.5 million. Its GAAP profit of $1.71 per share was 0.8% above analysts’ consensus estimates.

Company Overview

Known for its frozen garlic bread and Parkerhouse rolls, The Marzetti Company (NASDAQ:MZTI) sells bread, dressing, and dips to the retail and food service channels.

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 in specialty foods include Treehouse Foods (NYSE:THS), Flowers Foods (NYSE:FLO), and Clorox (NYSE;CLX), which owns the Hidden Valley dressing brand.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $1.93 billion in revenue over the past 12 months, The Marzetti Company is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, The Marzetti Company’s 4.2% annualized revenue growth over the last three years was sluggish, but to its credit, consumers bought more of its products.

This quarter, The Marzetti Company reported year-on-year revenue growth of 5.8%, and its $493.5 million of revenue exceeded Wall Street’s estimates by 4%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products will see some demand headwinds.

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.

The Marzetti Company’s average quarterly volume growth was a healthy 1.6% over the last two years. This is pleasing because it shows consumers are purchasing more of its products.

In The Marzetti Company’s Q3 2026, sales volumes jumped 3.2% year on year. This result was an acceleration from its historical levels, certainly a positive signal.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

The Marzetti Company has bad unit economics for a consumer staples company, giving it less room to reinvest and develop new products. As you can see below, it averaged a 23.6% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $76.42 went towards paying for raw materials, production of goods, transportation, and distribution.

In Q3, The Marzetti Company produced a 24.1% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

The Marzetti Company’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 11.1% over the last two years. This profitability was solid for a consumer staples business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, The Marzetti Company’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.

In Q3, The Marzetti Company generated an operating margin profit margin of 12%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, The Marzetti Company reported EPS of $1.71, up from $1.62 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects The Marzetti Company’s full-year EPS of $6.16 to grow 15.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

The Marzetti Company has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.2% 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).

Although The Marzetti Company hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 17.2%, higher than most consumer staples businesses.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

The Marzetti Company is a profitable, well-capitalized company with $182.2 million of cash and $41.04 million of debt on its balance sheet. This $141.1 million net cash position is 3% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing The Marzetti Company beat analysts’ revenue and EPS expectations this quarter, although the latter beat only slightly. On the other hand, its gross margin slightly missed. Overall, we think this was still a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 2% to $155.01 immediately following the results.

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

Before investing in or passing on The Marzetti Company, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

The Marzetti Company’s business quality ultimately falls short of our standards. To begin with, its revenue growth was a little slower over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its rising cash profitability gives it more optionality, the downside is its gross margins make it more difficult to reach positive operating profits compared to other consumer staples businesses. On top of that, its brand caters to a niche market.

The Marzetti Company’s P/E ratio based on the next 12 months is 23.2x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $197.20 on the company (compared to the current share price of $164.83).

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.