McCormick's Gross Margin Under Pressure: Will Q4 Show Relief?
McCormick & Company Inc.’s MKC adjusted gross profit margin declined 120 basis points in the third quarter of 2025, reflecting the impact of higher tariffs, increased commodity costs, and expenses tied to expanding capacity for future growth. On a reported basis, the company’s gross margin declined 130 basis points, as ongoing cost pressures weighed on profitability.Despite these challenges, McCormick’s Comprehensive Continuous Improvement (CCI) program continued to deliver meaningful savings. Efficiency gains from this initiative helped offset part of the inflationary burden, enabling the company to post a 2% increase in adjusted operating income and demonstrate solid execution under a difficult cost environment.McCormick was also able to cut selling, general & administrative (SG&A) expenses by 100 bps, mainly thanks to reduced employee-related costs linked to the CCI program. These actions helped cushion the effects of elevated input costs and tariffs. The company also mentioned that it would continue taking measures to address tariffs throughout fiscal 2025, which should provide some additional relief in the coming quarters.Looking ahead, McCormick expects cost pressures to persist through year-end, with its full-year gross margin now projected to remain flat versus its earlier outlook of flat to up 50 basis points. However, management anticipates a modest gross margin improvement in the fourth quarter, as savings initiatives gain momentum and mitigation efforts materialize.While near-term headwinds remain, McCormick’s focus on cost optimization, productivity enhancements and strategic capacity investments is expected to support gradual margin recovery and sustain long-term operational resilience.The Zacks Rundown for MKCMKC’s shares have plunged 16.1% year to date compared with the industry’s decline of 13.7%. MKC carries a Zacks Rank #4 (Sell).Image Source: Zacks Investment ResearchFrom a valuation standpoint, MKC trades at a forward price-to-earnings ratio of 19.92X, higher than the industry’s average 14.65X.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for MKC’s fiscal 2025 and 2026 earnings implies a year-over-year rise of 2.4% and 6.9%, respectively.Image Source: Zacks Investment ResearchBetter-Ranked Stocks to ConsiderUnited Natural Foods, Inc. UNFI distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 2.5% and 167.6%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 416.2%, on average.Lamb Weston Holdings, Inc. LW engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally. It sports a Zacks Rank #1 at present. Lamb Weston delivered a trailing four-quarter earnings surprise of 16%, on average.The Zacks Consensus Estimate for Lamb Weston's current fiscal-year sales indicates growth of 1.3% from the prior-year levels.Vital Farms VITL packages, markets and distributes shell eggs, butter and other products in the United States. It carries a Zacks Rank #2 (Buy) at present. Vital Farms delivered a trailing four-quarter earnings surprise of 35.8%, on average.The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales and earnings implies an increase of 27.2% and 16.1%, respectively, from the prior-year levels.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report McCormick & Company, Incorporated (MKC): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report Lamb Weston (LW): Free Stock Analysis Report Vital Farms, Inc. (VITL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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