Mixed: McCormick beats Q3 but trims 2025 EPS outlook as tariffs squeeze margins
Verdict: Mixed. McCormick beat third‑quarter sales and EPS, but margins tightened and it cut full‑year profit guidance; shares were slightly lower in premarket trading.
The company cited higher commodity costs and increased tariffs as key pressures, even as demand held up and volumes grew.
What drove the quarter
Revenue was about $1.72 billion, up 3% year over year (+2% organic, which strips out currency). Adjusted EPS was $0.85 versus $0.83 last year. Operating income was $289 million; adjusted operating income was $294 million. Management said this was the fifth straight quarter of volume‑led growth.
By segment, Consumer rose 4% to $973 million, led by the Americas and EMEA, with China still a drag. Flavor Solutions grew 1% to $752 million, helped by pricing.
Margins compressed. Gross margin was 37.4%, down 130 basis points (1 basis point = 0.01%) as commodities, tariffs, and capacity costs outweighed savings from the company’s CCI cost‑reduction program. Adjusted operating margin was 17.0%, down 20 basis points.
One‑offs were small: special charges reduced EPS by $0.01; adjusted results exclude these items.
Sources
Company press release for all quarterly figures, segment details, and margin commentary.
Context vs. expectations and stock reaction
The beat was modest: revenue of about $1.72 billion topped the $1.71 billion consensus, and adjusted EPS of $0.85 exceeded the $0.82 estimate. Shares dipped slightly in premarket trading and remain down roughly 10% year‑to‑date.
Versus last year’s Q3, adjusted EPS rose 2% ($0.85 vs. $0.83), while revenue grew 3%.
Guidance and outlook
Sales growth guidance is unchanged at 0% to 2% for fiscal 2025 (1% to 3% in constant currency). Profitability is the swing factor: adjusted operating income growth was trimmed to 2%–4% (from 3%–5%), and adjusted EPS was cut to $3.00–$3.05 (from $3.03–$3.08).
Reasons: higher commodity costs and tariffs that increased since August 1, 2025. Offsets include ongoing CCI cost savings and SG&A streamlining, but management still expects FX to be a headwind (about 2% to adjusted EPS) and a higher tax rate (~22% vs. 20.5% in 2024). Special charges of about $20 million are anticipated for 2025, or roughly a $0.05 EPS drag.
Key figures
Source: company press release; consensus and share move from Reuters.
| Metric | Q3 FY2025 | YoY | Consensus/Prior | Notes |
|---|---|---|---|---|
| Net sales | $1.72B | +3% (+2% organic) | $1.71B consensus | 1% FX tailwind; volume‑led |
| Adjusted EPS | $0.85 | +2% | $0.82 consensus | Adjusted = excludes one‑time items |
| Gross margin | 37.4% | -130 bps | — | Commodity, tariff and capacity costs; CCI savings helped |
| Adjusted operating income | $294M | +2% | — | Adj. operating margin 17.0% (-20 bps) |
| FY25 adjusted EPS guide | $3.00–$3.05 | Cut | Prior $3.03–$3.08 | Sales growth guide unchanged at 0%–2% |
What to watch next
Tariffs and input costs: direction of trade actions and commodities will drive whether margins stabilize or compress further.
Execution on cost savings versus growth spend: can CCI and SG&A streamlining offset brand and technology investments without hurting volume?
Regional mix and China recovery: Consumer in China remains soft; management expects gradual improvement.
Flavor Solutions profitability: pricing helped, but commodity and tariff headwinds weighed on margins.
FX and joint‑venture income: a stronger U.S. dollar is expected to trim income from unconsolidated operations, partly offset by continued strength in McCormick de Mexico.