McCormick has pricing power. And as inflation pressures household budgets, consumers are pulling back on restaurant dining and pivoting toward cooking at home, placing this brand at the centre of a consumer shift. Furthermore, that ability to successfully pass along targeted price increases expands profit margins without sacrificing brand equity. At the same time, a big pending merger with Unilever Foods promises to unlock substantial global distribution channels and long-term cost savings.
Meanwhile the stock trades at 16.2 times the company’s forward earnings forecast.
MCCORMICK & CO. INC. (New York symbol MKC; www.mccormick.com) makes spices, seasonings and flavours. Its main brands include Frank’s Red Hot sauce, French’s mustard and Lawry’s barbecue sauce.
McCormick has agreed to merge with the food business of European-based consumer products giant Unilever plc (New York symbol UL), excluding its food operations in India. Unilever’s main food brands include Hellmann’s mayonnaise and Knorr soup mixes.
Unilever shareholders will own 55.1% of the combined company with McCormick shareholders owning 35.0%. Unilever will hold the remaining 9.9%, which it plans to sell over time. McCormick will also pay Unilever $15.7 billion in cash.
The new firm will retain the McCormick name, and the shares will continue to trade on the New York exchange.
Following the merger, the combined operations will have annual sales of $20 billion. Emerging markets will supply 41% of its sales, followed by North America (36%) and Europe (23%). Consumers will account 70% of sales, while sales to restaurants will supply the remaining 30%.
Eliminating overlapping operations should cut $600 million from the new McCormick’s annual costs by the end of the third year. As a result, the new firm’s gross profit margin will total 21% of sales compared to 17% currently for McCormick.
If shareholders and regulators approve, the companies expect to complete the transaction in mid-2027.
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McCormick’s long-term prospects is highlighted by activist interest
Meanwhile, this pending deal has attracted the interest of activist hedge fund Toms Capital.
It’s unclear if Toms aims to block the deal or demand better terms for McCormick and its investors. But either way, it draws attention to McCormick’s overall prospects.
Meantime, in its fiscal 2026 second quarter, ended May 31, 2026, McCormick’s sales rose 16.7%, to $1.94 billion from $1.66 billion a year earlier. If you exclude the contribution of acquisitions and the negative impact of currency rates, sales improved 1.7% as higher selling prices (up 2.2%) offset lower volumes (down 0.5%). The latest sales figure also beat the consensus forecast of $1.90 billion.
Earnings before unusual items in the quarter improved 15.9%, to $0.80 a share (or a total of $215.9 million) from $0.69 a share (or $184.8 million). That also topped the $0.69 consensus estimate.
The higher earnings are partly due to a decision by the U.S. Supreme Court striking down the Trump administration’s emergency tariffs. As a result, a tariff refund added $0.07 a share to earnings in the latest quarter.
The company now expects its sales (excluding currency rates) for all of fiscal 2026 will rise about 2%. It should also earn between $3.05 and $3.13 a share. The stock trades at 16.2 times the midpoint of that range. That’s a reasonable multiple, but big mergers add risk. The $1.92 dividend yields 3.8%.
Recommendation in Wall Street Stock Forecaster: McCormick & Co. Inc. is a hold.
