McCormick & Co. lowered its full-year 2025 earnings guidance to reflect mounting cost pressures from rising commodity prices and incremental tariffs. Management estimates that tariffs represent approximately $140 million in annualized exposure, with about $70 million impacting 2025 results. The company also faces headwinds from the dynamic global trade environment and has had to absorb significant additional costs while trying to maintain volume momentum.
The company is absorbing substantial costs rather than fully passing them through to consumers. This strategy may be necessary for market share defense, but it limits near-term earnings growth potential
MCCORMICK & CO. INC. (New York symbol MKC) makes spices, seasonings and flavours.
McCormick continues to shift its focus to more profitable products. The company is also benefiting as a still-high cost of living prompts more consumers to eat at home instead of restaurants.
McCormick has agreed to increase its stake in its joint venture in Mexico with Grupo Herdez, from 50% to 75%.
This business makes a variety of products for the Mexican market, including mayonnaise, spices, marmalades, mustard, hot sauce and tea, under McCormick brands.
The company will pay Grupo Herdez $750 million. To put that in perspective, McCormick earned $184.4 million, or $0.69 a share, in its fiscal 2025 second quarter, ended May 31, 2025. McCormick will probably complete the transaction by the end of 2025. The purchase should immediately add to the company’s earnings.
In its fiscal 2025 third quarter, ended August 31, 2025, McCormick’s sales rose 2.7%, to $1.72 billion from $1.68 billion a year earlier. If you exclude the contribution of acquisitions and the negative impact of currency rates, sales improved 1.8% on higher volumes (up 1.2%) and selling prices (up 0.6%). The latest sales figure also beat the consensus forecast of $1.71 billion.
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Earnings before unusual items in the quarter improved 2.1%, to $229.1 million from $224.4 million; earnings per share gained 2.4%, to $0.85 from $0.83, on fewer shares outstanding. That also topped the $0.82 consensus estimate.
McCormick’s dividend star status maintained but at a premium valuation
McCormick gets many of its raw materials, including black pepper, cinnamon, turmeric, ginger, nutmeg, vanilla and cloves, from outside the U.S. As a result, the company now expects the new U.S. tariffs will increase its annual costs to $140 million from its earlier forecast of $90 million.
The company is working with restaurants and food makers to re-formulate its products as the U.S. government bans certain food dyes. These dyes are only a small number of the company’s products, so the cost of this change will probably be low.
McCormick still expects its sales (excluding currency rates) for all of fiscal 2025 will rise about 2%. However, it cut its full-year earnings forecast, to between $3.00 and $3.05 a share from $3.03 to $3.08 a share.
The stock trades at 21.6 times the midpoint of that lower range. That’s a somewhat high multiple as cost-conscious consumers switch to cheaper, generic brands of spices.
The company pays quarterly dividends of $0.45 per share and has increased its dividend for 38 consecutive years, maintaining dividend aristocrat status. The $1.80 dividend yields 2.8%.
Recommendation in Wall Street Stock Forecaster: McCormick & Co. Inc. is a hold.
