McCormick & Company, Incorporated (MKC) delivered one of those classic mixed-bag quarters that Wall Street loves to punish. The spice and flavor giant beat on revenue but stumbled on profitability, and investors weren't having it. Shares dropped 6% Thursday to hit a fresh 52-week low.
Here's what happened: McCormick reported fourth-quarter adjusted earnings of 86 cents per share, falling short of the 88-cent consensus. Revenue came in at $1.850 billion, slightly ahead of the $1.845 billion analysts expected. So they made more money but kept less of it, which is never a great look.
Breaking Down the Quarter
Net sales climbed 3% year over year, with currency providing a 1% boost. Organic sales growth came in at 2%. The Consumer segment performed better, with sales rising 4% to $1.127 billion, while the Flavor Solutions segment grew 2% to $723 million. Both segments got a 1% lift from favorable currency movements.
The problem was margins. Adjusted operating income reached $317 million compared to $308 million last year, but gross profit actually declined by $2 million from the prior-year period. More concerning, gross profit margin contracted by 130 basis points.
On the earnings call, CEO Brendan Foley explained that fourth-quarter gross margins got squeezed by inflation across a wide range of commodities and tariff costs that came in higher than the company anticipated. It's the kind of dual pressure that's tough to manage when you're sourcing ingredients globally and selling into competitive retail markets.
The company finished the quarter with $95.9 million in cash and equivalents.
Looking Ahead to Fiscal 2026
Despite the margin pressure, McCormick offered an optimistic outlook. The company projects fiscal 2026 earnings between $3.05 and $3.13 per share, comfortably above the $2.97 consensus estimate. Sales are expected to grow 12% to 16% at constant currency.
Management expects volume growth and pricing gains to drive the top line, while margin expansion, the McCormick de Mexico acquisition, and cost-saving initiatives should boost adjusted operating income. That's the good news. The offsets include ongoing commodity inflation, higher selling and administrative expenses, an elevated effective tax rate, and increased interest costs tied to the Mexico acquisition.
The stock closed at $62.56, down 6% for the day and marking a new 52-week low. Apparently investors wanted to see better margin performance today rather than promising guidance for tomorrow.
