Why my team and I like McCormick's stock
My team and I at Stansberry Research always share our best ideas first with our subscribers to our Stansberry's Investment Advisory flagship newsletter...
But occasionally, my editors give me permission to share one of our recommendations – on a delayed basis – with readers of my free daily e-mail.
So today, I'd like to share some details on our analysis of food and spice company McCormick (MKC)...
We initially recommended the stock in the August issue of the Investment Advisory. (If you're already a subscriber, you can read our full write-up right here.)
(If you aren't a subscriber, you can find out how to gain full access to it – as well as instant access to our entire portfolio of current open recommendations – by clicking here.)
As background, McCormick is the largest herbs and spices company in the world. As we explained in the Investment Advisory issue:
The company commands a roughly 40% share of the U.S. spice market. McCormick-branded black pepper, vanilla, cinnamon, oregano, and red pepper stock the shelves at most of the largest grocery chains.
In 2025, spices and seasonings accounted for 22% of McCormick's sales. Condiments and sauces were another 22%. Regional leaders, which include local brands sold in international markets, made up 12% of sales.
Overall, the consumer segment accounted for 61% of overall revenue last year.
The other 39% of sales came from McCormick's business-to-business ("B2B") segment, called Flavor Solutions. It develops customized seasonings, coatings, condiments, and compound flavors for food manufacturers, restaurant chains, and food-service customers.
Here's a breakdown of the company's sales that we shared in the issue:
As you can see in this chart, McCormick also has a long history of steady growth in revenues and profits:
And McCormick's free cash flow ("FCF") has been strong as well. You can see what I mean in this chart of cash from operations, capital expenditures ("capex"), and FCF:
In light of this, you may be shocked to learn that McCormick has fallen hard in recent years. Take a look at this 20-year stock chart:
And at yesterday's closing price of $44.14 per share, the stock trades at only around 13.5 times consensus analysts' estimates for 2027. That's the lowest forward multiple in around 16 years.
A major reason for this is that investors are lumping McCormick in with other food and alcohol companies – like McDonald's (MCD), General Mills (GIS), ConAgra (CAG), Campbell's (CPB), Kraft Heinz (KHC), Brown-Forman (BF-B), and Diageo (DEO).
As we discussed in the Investment Advisory issue, many of those businesses are experiencing weakening sales and profits due to the GLP-1 weight-loss drugs.
Millions of Americans on the drugs are altering their eating habits by reducing high-calorie, highly processed foods and snacks in favor of whole foods heavy in fiber and protein.
But as my team and I discussed, we believe McCormick is benefiting from this massive shift...
If someone is on GLP-1 drugs or otherwise watching what they eat, they may eat less food or choose healthier options. But they'll still season their meals with spices, herbs, or condiments. They may need to add even more flavor to combat "Ozempic tongue" or make their "paleo" meals appetizing.
Meanwhile, McCormick's stock dropped 5% yesterday after the company reported third-quarter earnings...
Revenue rose 17.4% to $2.02 billion. That slightly beat estimates of $1.98 billion... though all but 2% of the growth was due to the acquisition of McCormick de Mexico.
Adjusted earnings per share ("EPS") came in at $0.86, up a penny year over year and handily surpassing estimates of $0.76.
Adjusted gross margin was 39.3%, up 180 basis points year over year and helped by productivity initiatives and the acquisition.
McCormick also reaffirmed its guidance for net sales growth, adjusted operating income, and adjusted EPS for the full year.
So... why did the stock drop?
Well, investors are concerned about future growth and profitability...
Given that McCormick just beat EPS estimates and there's only one quarter left in the year, by merely reaffirming annual guidance, management signaled an earnings miss next quarter.
That's driven by higher commodity and freight costs, commercial investment in the company's Consumer Americas division, and the timing of marketing spending.
Management acknowledged that these pressures will continue into 2027.
However, investors are likely too focused on the slow-growth existing business and are failing to appreciate the benefits that will come from McCormick's planned acquisition of Unilever's (UL) food division.
The deal is expected to close by mid-2027. And as we said in the Investment Advisory issue, it's an ideal complement to McCormick – with brands like Hellmann's mayonnaise and Knorr dried soups, bouillon cubes, and seasonings.
This massive deal would more than double McCormick's revenues from less than $8 billion to more than $20 billion. With this combination, McCormick can boost its existing competitive advantages of scale, distribution, and brand recognition.
On top of the strong strategic fit, the companies foresee $600 million of annual cost savings from joining forces on purchasing, manufacturing, and logistics, and from reducing back-office overlap. Importantly, McCormick has a history of successful acquisitions.
These savings – plus the fact that Unilever Foods has even wider operating margins than McCormick – should boost McCormick's margins and profits substantially.
In summary, my team and I see a bright future for McCormick. That's in sharp contrast to the consensus view – reflected in the stock price – that this is a melting ice cube.
Again, Investment Advisory subscribers have access to our full write-up on McCormick – including our specific "buy" advice regarding the stock – right here.
These folks are also on the list to receive the brand-new issue publishing today after the market close. In it, my team and I will discuss our latest favorite stock idea.
If you aren't a subscriber already, learn how to become one here.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.