Results at a glance
- Period
- FY2026Q3
- Revenue
- $2B (2,024.8 MUSD)
- Net income
- $97.6M (97.6 MUSD)
- Net margin
- 4.8%
From the Mccormick Open LedgerView the live ledger
McCormick grew net sales 17.4% to $2,024.8 million in the third quarter of fiscal 2026 and earned $0.36 a share, down from $0.84 a year ago. Both numbers are true and neither describes the quarter. Only 1.9 points of that sales growth is organic — price up 2.2%, volume and mix down 0.3% — while 14.6 points come from consolidating McCormick de Mexico, the Mexican joint venture McCormick took control of on January 2, 2026 with a $750 million purchase of another 25%. And the earnings collapse is a cost ledger, not an operating one: $141.5 million of special charges, two-thirds of it bankers, lawyers and consultants for the pending Unilever Foods merger, plus a $43.1 million impairment on a shuttered Malaysian pepper project. Strip those and adjusted operating income rose 22.1% to $358.5 million while adjusted EPS held at $0.86. We rebuilt five fiscal years plus this quarter as a public Beancount ledger, with every deal cost on a labeled line, so the acquired growth and the merger bill can be read separately. It joins the consumer shelf next to General Mills, PepsiCo and Walmart.
The Headline Numbers
| Metric | Q3 FY2026 | Q3 FY2025 | YoY |
|---|---|---|---|
| Net sales | $2,024.8M | $1,724.9M | +17.4% |
| Gross margin | 39.3% | 37.4% | +190 bp |
| Operating income (reported) | $217.0M | $288.7M | −24.8% |
| Special charges | $141.5M | $3.9M | n/m |
| Adjusted operating income | $358.5M | $293.6M | +22.1% |
| Net income attributable to McCormick | $97.6M | $225.5M | −56.7% |
| Adjusted net income | $231.7M | $229.1M | +1.1% |
| Diluted EPS | $0.36 | $0.84 | −57.1% |
| Adjusted diluted EPS | $0.86 | $0.85 | +1.2% |
The table reads as a walk with one step. Reported operating income of $217.0 million plus the $141.5 million of special charges equals the $358.5 million of adjusted operating income — the $142M of the headline, rounded. Note 3 of the 10-Q names each item: $95.3 million of transaction and integration expenses, of which $94.6 million supports the pending Unilever Foods merger (due diligence, deal execution and integration planning — "primarily comprised of banking, legal, and consulting fees") and only $0.7 million relates to McCormick de Mexico; a $43.1 million non-cash impairment plus $1.8 million of exit costs from ceasing a development-stage pepper sourcing and agricultural-technology project in Malaysia; and $1.3 million of other costs. There is one more merger cost below the operating line: $12.4 million of amortized debt-financing fees inside interest expense, which is why total special charges in the note foot to $153.9 million while the operating walk uses $141.5 million.
Below operating income, everything moved against GAAP EPS at once. Interest expense rose to $68.4 million from $50.2 million on the financing-fee amortization plus higher rates and higher average borrowings (the Mexico deal was funded with cash on hand and commercial paper). Other income fell to $5.9 million from $9.4 million as the acquisition drained the average cash balance. The effective tax rate more than doubled to 32.3% from 15.9%, "primarily driven by the unfavorable impact of nondeductible expenses and lower favorable discrete tax items" — some of those Unilever bills are not deductible. Income from unconsolidated operations fell to $3.0 million from $19.1 million, mechanically: McCormick de Mexico's earnings used to arrive on that line through the equity method, and now they arrive inside consolidated sales while Grupo Herdez's 25% leaves through noncontrolling interests, up to $10.0 million from $2.2 million. The 10-Q's own EPS bridge ties it out: $0.84, plus $0.20 of operating-income improvement, minus $0.49 of special charges, $0.02 of interest, $0.01 of other income, $0.07 of tax rate, $0.03 of noncontrolling interest and $0.06 of unconsolidated income — equals $0.36.
Revenue Deep Dive
| Segment | Q3 FY2026 | Q3 FY2025 | Reported | Organic | Price | Vol/mix | Acquisition | Segment OI | OI YoY |
|---|---|---|---|---|---|---|---|---|---|
| Consumer | $1,215.4M | $973.2M | +24.9% | +1.1% | +2.2% | −1.1% | +23.2% | $241.1M | +24% |
| Flavor Solutions | $809.4M | $751.7M | +7.7% | +3.0% | +2.2% | +0.8% | +3.4% | $117.4M | +18% |
| Total | $2,024.8M | $1,724.9M | +17.4% | +1.9% | +2.2% | −0.3% | +14.6% | $358.5M | +22.1% |
The growth decomposition is the whole quarter in one row: price +2.2 and volume/mix −0.3 (organic +1.9), acquisition +14.6, currency +0.9. McCormick de Mexico added $251.7 million of reported sales in the quarter — without it, the company grew about 3% including currency. The two segment operating incomes add to exactly the $358.5 million of adjusted operating income, which is by construction: McCormick manages its segments on operating income excluding special charges.
Consumer is where the acquisition lives. Reported sales rose 24.9% while organic sales rose 1.1%: price up 2.2%, volume and mix down 1.1%. The Americas region tells the story at full strength — up 31.7% reported on a 32.1% contribution from McCormick de Mexico, down 0.3% organically as a 2.5% volume decline more than offset 2.2% pricing. EMEA (+5.2%, organic +5.0% on 2.0% volume and 3.0% price) and APAC (+10.7%, organic +4.4% on 4.1% volume) are the genuinely growing pieces, but they are the smaller pieces. Segment operating income rose 24% to $241.1 million on higher gross profit, "partially offset by increased SG&A expenses including investments in brand marketing and technology."
Flavor Solutions is the better underlying quarter. Organic sales grew 3.0% — price +2.2%, volume and mix +0.8% — with the acquisition adding only 3.4%. APAC surged 14.2% on 10.0% volume growth "primarily driven by growth in China," though pricing there ran −1.7%, the only negative price print in either segment. The Americas grew 8.4% (organic +2.7%, pricing +2.8%), while EMEA managed only 1.6% as volumes fell 1.0% "driven by the effect of lower sales to quick-service restaurant customers." Segment operating income rose 18% to $117.4 million with margin expanding to 14.5% from 13.3%.
We read the release for the seven demand and supply themes we track in every earnings post. None of the demand phrasings appear — no "robust demand," no tight supply, no upcycle. What appears instead is pricing: both segments took +2.2% while total volumes slipped 0.3%, and the outlook says volumes should be "stable" with "increased pricing benefits relative to the prior year." The absence is the finding. This is a price-led quarter in a "dynamic operating environment," and the volume half of the equation is doing nothing.
The Margin Story
| Period | Net sales | Gross margin | Operating margin | Adjusted op. margin | Net margin |
|---|---|---|---|---|---|
| FY2021 | $6,317.9M | 39.5% | 16.1% | 17.4% | 11.8% |
| FY2022 | $6,350.5M | 35.8% | 13.6% | 14.4% | 10.6% |
| FY2023 | $6,662.2M | 37.6% | 14.5% | 15.4% | 10.1% |
| FY2024 | $6,723.7M | 38.5% | 15.8% | 15.9% | 11.6% |
| FY2025 | $6,840.3M | 37.9% | 15.7% | 16.0% | 11.5% |
| Q3 FY2025 | $1,724.9M | 37.4% | 16.7% | 17.0% | 13.1% |
| Q3 FY2026 | $2,024.8M | 39.3% | 10.7% | 17.7% | 4.8% |
The gross margin row is the good news and it is real: 39.3% is the highest print in this table, up 190 basis points, driven by the McCormick de Mexico contribution, favorable pricing, and cost savings from the Comprehensive Continuous Improvement (CCI) program, partly offset by higher commodity and freight costs "including the impact of the conflict in the Middle East." The operating margin row then falls off a cliff to 10.7% — and the adjusted column explains that the cliff is entirely the $141.5 million of special charges. Adjusted operating margin of 17.7% is also the best in the table, up 70 basis points.
The cost line that moved against the company was SG&A, which rose as a share of sales by 110 basis points, "primarily driven by the impact of the McCormick de Mexico acquisition and increased investments in technology." The release is explicit that this is a choice, not leakage: brand marketing investment is projected to rise by low-to-mid-teens digits for the full year, and the CCI program's selling, general and administrative streamlining is supposed to fund it. One quarter cannot judge that bargain. But note what the comparison proves: adjusted operating income grew 22% while SG&A deleveraged, so the margin expansion came from gross profit — mix, price and productivity — not from running leaner overhead.
Pricing is doing heavy lifting across the whole P&L. Company-level organic price/mix was +2.2 points against −0.3 of volume, and the full-year outlook expects volumes merely "stable" with "increased pricing benefits." There is also a one-off inside the year-to-date gross margin the quarter does not show: the IEEPA tariff refund, recognized primarily in the second quarter after the Supreme Court's February ruling, which the outlook says "will be offset with increased inflationary costs" — a wash by year end, but a reminder that 2026 gross margin has a refund in it that 2027 will lap.
The One Big Question: What Did $750M Buy — and What Does $15.7B Buy Next?
McCormick is running two acquisitions at once: one closed, one pending. The closed one is McCormick de Mexico. On January 2, 2026, McCormick paid $750.0 million in cash for another 25% from Grupo Herdez, lifting its stake from 50% — previously an equity-method investment — to a 75% controlling interest, consolidated from that date. Note 2 of the 10-Q gives the full purchase accounting:
| McCormick de Mexico (USD millions) | Amount |
|---|---|
| Cash paid | $750.0 |
| Effective settlement of preexisting amounts | $(6.7) |
| Fair value of previously held 50% interest | $1,008.0 |
| Total consideration | $1,751.3 |
| Intangible assets | $1,600.0 |
| Goodwill (not tax deductible) | $939.9 |
| Other net assets acquired | $184.9 |
| Deferred tax liabilities | $(469.2) |
| Fair value of 25% noncontrolling interest | $(504.3) |
| Net assets acquired | $1,751.3 |
Two lines deserve attention. The $1,600.0 million of intangibles is dominated by a $1,470.0 million reacquired right — the perpetual, exclusive license for McCormick-branded products in Mexico that returns home with control, valued as an indefinite-lived asset — plus $130.0 million of customer relationships amortized over 15 years. And the $1,008.0 million fair value on the old 50% stake produced an $866.8 million remeasurement gain, pre- and after-tax, which sits in the nine-month income-from-unconsolidated-operations line — $892.5 million for nine months against $3.0 million this quarter. That gain is why nine-month diluted EPS is $4.69 while the third quarter earned $0.36. It is real value crystallized, it is entirely non-cash, and it will never repeat.
The pending one is Unilever Foods. On March 31, 2026, McCormick agreed to a Reverse Morris Trust combination with Unilever's Foods business (excluding India, Nepal, Portugal and several other businesses): current Unilever shareholders would own about 55.1% of the combined company, McCormick holders about 35.0%, Unilever would retain up to 9.9%, and Unilever receives a one-time $15.7 billion cash payment. The prize as pitched is roughly $20 billion of combined FY2025 revenue at a 21% operating margin, $600 million of annual run-rate cost synergies (two-thirds by year two), and mid-to-high-single-digit adjusted EPS accretion in the first twelve months. Expected close: mid-2027. This quarter's $107.0 million of Unilever costs — $94.6 million of transaction and integration plus $12.4 million of financing-fee amortization — plus $75.0 million of debt financing fees paid in the nine-month cash flow statement are the down payment, and the 10-Q warns the merger "is likely to result in a material increase in our debt."
For the quarter at hand, the release's GAAP-to-adjusted bridge is the cleanest summary:
| GAAP → adjusted bridge, Q3 FY2026 | USD millions |
|---|---|
| Operating income (GAAP) | $217.0 |
| Special charges | $141.5 |
| Adjusted operating income | $358.5 |
| Income tax expense | $49.9 |
| Tax on special charges | $19.8 |
| Adjusted income tax expense | $69.7 |
| Net income attributable to McCormick | $97.6 |
| Special charges, net of NCI | $134.1 |
| Adjusted net income | $231.7 |
| Diluted EPS | $0.36 |
| Special charges per share | $0.50 |
| Adjusted diluted EPS | $0.86 |
The full-year outlook was reaffirmed around both deals: net sales growth of 13% to 17% (11 to 13 points from McCormick de Mexico, 1 point of currency, 1% to 3% organic), adjusted operating income up 16% to 20%, and adjusted EPS of $3.05 to $3.13 — up 2% to 5% from last year's $3.00 — at a roughly 24.0% tax rate versus 21.5% in 2025, with higher interest and the Herdez minority's 25% share as the offsets the release names.
Tracking a $6.8B Company in Plain Text
Double-entry makes an acquisition-driven quarter legible: every dollar of deal cost has to sit on a labeled line, and the balance sheet still has to tie after it. The conventions match every other company in this series: how we model every company. Income postings are credits (negative), expenses are debits (positive), and Equity:Adjustments absorbs attributable net income, so each income-statement transaction sums to zero while the balance assertions pin retained earnings. This is the quarter as pushed to the ledger:
; Check: −2024.8 + 1229.9 + 436.4 + 141.5 + 59.5 + 10.0 + 49.9 + 97.6 = 0 ✓
2026-08-31 * "McCormick & Company, Incorporated" "FY2026Q3 Income Statement"
Income:Revenue -2024.8 MUSD
Expenses:CostOfRevenue 1229.9 MUSD
Expenses:SellingGeneralAdministrative 436.4 MUSD
Expenses:OtherNet 141.5 MUSD ; special charges: transaction and integration 95.3 (94.6 Unilever Foods merger + 0.7 McCormick de Mexico) + asset impairment 43.1 + severance 1.8 + other 1.3 (Note 3)
Expenses:OtherNet 59.5 MUSD ; interest expense 68.4 (incl. 12.4 Unilever financing-fee amortization) − other income, net 5.9 − income from unconsolidated operations 3.0
Expenses:OtherNet 10.0 MUSD ; net income attributable to noncontrolling interests (Grupo Herdez 25%)
Expenses:IncomeTax 49.9 MUSD
Equity:Adjustments 97.6 MUSD ; net income attributable to McCormick offset (RE set by balance assertion)The balance-sheet number that tells the narrative is $11,262.8 million of goodwill plus intangibles — $6,303.9 million and $4,958.9 million respectively — against $16,650.6 million of total assets. More than two-thirds of McCormick's balance sheet is the memory of past deals, and that was true before this quarter: the ratio was already 65% at the end of FY2025. The Mexico deal added $939.9 million of goodwill and $1,600.0 million of intangibles in one stroke, and the mirror image sits in equity, where noncontrolling interests jumped from $31.6 million to $583.8 million for Herdez's 25%. When the Unilever Foods merger closes — $15.7 billion of cash changing hands — this ratio, not the income statement, is the page to watch.
The Multi-Year Arc
| Period | Net sales | Operating margin | Net income | Goodwill | Intangibles | Total debt | NCI |
|---|---|---|---|---|---|---|---|
| FY2021 | $6,317.9M | 16.1% | $747.3M | $5,335.8M | $3,452.5M | $5,282.7M | $14.5M |
| FY2022 | $6,350.5M | 13.6% | $675.8M | $5,212.9M | $3,387.9M | $5,149.6M | $18.7M |
| FY2023 | $6,662.2M | 14.5% | $675.1M | $5,260.1M | $3,356.7M | $4,411.4M | $22.8M |
| FY2024 | $6,723.7M | 15.8% | $781.0M | $5,227.5M | $3,318.9M | $4,341.9M | $25.8M |
| FY2025 | $6,840.3M | 15.7% | $783.3M | $5,301.3M | $3,293.1M | $3,996.3M | $31.6M |
| Q3 FY2026 | $2,024.8M | 10.7% | $97.6M | $6,303.9M | $4,958.9M | $5,018.2M | $583.8M |
Net sales grew 8% in four years, from $6.32 billion to $6.84 billion — a low-single-digits compounder whose FY2022 trough (gross margin 35.8%, operating margin 13.6%) came from the inflation wave the whole packaged-food shelf ate that year. The same year McCormick sold its Kitchen Basics broth business, booking a $63.2 million gain inside other income; FY2021's deal costs ran the other way, with $29.0 million of Cholula and FONA transaction and integration expenses on their own line. Through it all the company deleveraged patiently: total debt fell from $5.28 billion to $4.00 billion while the dividend kept climbing — this quarter's $0.48 is up from $0.45 a year ago.
The third quarter breaks both trends at once. Debt is back to $5.02 billion, and the increase sits almost entirely in short-term borrowings and current maturities — $2,112.1 million, up from $890.5 million at year end — the commercial paper that helped fund the $750 million Mexico payment alongside cash on hand. That is manageable for a company guiding to "strong cash flow," but it arrives just as the Unilever Foods merger promises a "material increase" in debt on top. McCormick spent four years earning the balance-sheet room it is now spending twice.
The Verdict: Bull vs. Bear
Bull Case
- Adjusted operating income grew 22% and adjusted margin hit 17.7%, the best print in five years — the deal costs depressing GAAP EPS are itemized, finite, and mostly merger-related.
- Gross margin expanded 190 basis points on Mexico mix, +2.2% pricing and CCI productivity, and the reaffirmed outlook calls for another 100–120 basis points of adjusted gross margin expansion this year.
- McCormick de Mexico is already accretive: $251.7 million of quarterly sales, a 75% controlling stake in a prominent Mexican food portfolio, and integration "substantially completed" per the CEO.
- Flavor Solutions grew 3.0% organically with 18% segment profit growth and China volumes up 10% — the non-deal half of the business is healthy.
- The Unilever Foods combination offers $600 million of run-rate synergies and a 21%-margin revenue base at roughly triple McCormick's sales — if it closes mid-2027 as planned.
Bear Case
- Volumes fell 0.3% company-wide and 2.5% in Consumer Americas; none of the seven demand themes appears in the release, and the guide assumes volumes merely stabilize — growth is entirely price and deals.
- GAAP EPS of $0.36 carries a 32.3% tax rate with nondeductible merger costs; if Unilever spending runs past close, the GAAP-to-adjusted gap persists into 2027.
- Two-thirds of the balance sheet is goodwill and intangibles, and the $1,470.0 million Mexico reacquired right is an indefinite-lived judgment — another Malaysia-style $43.1 million impairment is always one strategy review away.
- Short-term debt more than doubled to $2.11 billion for the Mexico payment while the merger's $15.7 billion cash ticket and "material" debt increase still lie ahead.
- Nine-month EPS of $4.69 is two-thirds mirage: $3.22 of it is the non-cash, non-repeatable $866.8 million remeasurement gain, and the IEEPA tariff refund flatters the year-to-date gross margin that 2027 must lap.
Our Take: Pay for the 17.7%, not the 10.7% — but pay with eyes open about what the 17.7% contains. The adjusted margin is genuinely the best in years, built on pricing power and a Mexico asset that is already contributing, and the $141.5 million GAAP drag is labeled line by labeled line. The worry is everything the adjustments exclude at once: volumes are negative, the tax rate is up for a structural reason, short-term debt doubled, and a merger that leaves current holders with 35% of the company has just begun billing. We would judge this quarter a success if, one year from now, Consumer Americas organic sales are positive without another point of price — and a warning if the Unilever bill is still running at $100 million a quarter with the close no closer.
