McCormick beats estimates, then slips toward a 52-week low: US shoppers bought 2.5% less as prices rose 2.2%

McCormick & Company reported third-quarter net sales up 17.4% on Thursday and reaffirmed its fiscal 2026 outlook, but nearly all of that growth came from consolidating McCormick de Mexico, which it took control of in January. Organic sales, which strip out the acquisition and currency, rose 1.9%, according to the earnings release filed with the SEC.

Adjusted earnings per share were $0.86, against $0.85 a year earlier. Reported EPS fell to $0.36 from $0.84 because of $0.50 a share in special charges, which include transaction and integration costs for its pending combination with Unilever's food business and a $43.1 million non-cash impairment after McCormick decided to shut a development-stage pepper sourcing project in Malaysia.

Both headline numbers beat Wall Street. Analysts polled by FactSet expected adjusted EPS of $0.76 and revenue of $1.98 billion, against the $0.86 and $2.02 billion McCormick reported, CNBC reported, and the shares rose nearly 5% before the open. The gain did not last. By 9:55 a.m. the stock was at $45.43, down 2.1% from Wednesday's $46.40 close, after topping out at $46.94, according to Nasdaq. That is less than 2% above its 52-week low of $44.82 and 37% below its 52-week high of $72.41, for a market value of about $12.2 billion.

The number behind the 1.9%

The release does not explain the share move, but its detail shows why the beat is thinner than it looks. The headline organic figure blends two very different stories. McCormick's own breakdown splits organic growth into volume and price, and in the Americas consumer business the split is lopsided:

In the Americas consumer business, the jars on supermarket shelves, shoppers took home 2.5% less product while paying 2.2% more for it, and organic sales slipped 0.3%. Growth in Europe and Asia carried the total. The 2026 guidance assumes "total volumes expected to be stable with increased pricing," and in the Americas consumer unit that is not yet what happened this quarter.

Profit tells the other half. Gross margin widened 190 basis points to 39.3%, and adjusted operating income rose 22% to $359 million. McCormick credited the Mexico deal, higher sales and its cost-cutting program, partly offset by "higher commodity and freight costs." Price increases on flat volume are what a company does when costs rise, and the release says inflationary costs "related to the Middle East conflict" will offset this year's tariff refund benefit.

Who pays: restaurants and food makers

The Flavor Solutions segment sells seasonings, coatings and flavors to packaged food companies and restaurant chains. Its sales rose 8% to $809 million. In the Americas, those customers took essentially the same volume (down 0.1%) and paid 2.8% more for it, a larger increase than consumers saw in the store.

For an independent restaurant that buys spice blends and seasonings through a distributor, McCormick's price is one input among many, but it is a read on the direction of the pantry line. A kitchen spending $1,500 a month on seasonings, sauces and flavor bases would pay about $42 more a month at a 2.8% increase, roughly $500 a year, before any distributor markup. That is small on its own; the issue is that it is stacking on top of freight-driven increases across the rest of the order.

605,380 independent restaurants are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 79,108 in CA, 54,058 in TX, 51,387 in NY. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

Our restaurant operating playbook covers how independent kitchens handle menu pricing when ingredient costs move.

What we're watching

The full-year outlook is unchanged: reported sales growth of 13% to 17%, organic growth of 1% to 3%, and adjusted EPS of $3.05 to $3.13. McCormick expects a tax rate of about 24% this year against 21.5% in 2025, which is why a 22% gain in adjusted operating income turned into only 1.2% growth in adjusted EPS this quarter. The Unilever Foods combination, which McCormick says would create a company with about $20 billion in 2025 revenue, is still expected to close by mid-2027. The next test is whether Americas consumer volume stops shrinking once the price increases are fully lapped.

Sources: McCormick & Company Q3 2026 earnings release (Form 8-K, Exhibit 99.1); CNBC for FactSet estimates; Nasdaq quote for MKC; business counts from CheckThisBiz. This is market information, not investment advice.