McCormick Stock Sinks To 52-Week Low - Here's Why

McCormick & Company, Incorporated (NYSE:MKC) shares fell nearly 6% on Tuesday after posting stronger-than-expected quarterly results, as investors appeared cautious about the company’s newly announced $44.8 billion merger with Unilever PLC’s (NYSE:UL) food business. The deal, which involves a $15.7 billion cash payout, appears to have sparked immediate concerns over the company’s future debt load and equity dilution. Details The company reported first-quarter adjusted earnings per share of 66 cents, beating the analyst consensus estimate of 60 cents. Quarterly sales of $1.874 billion outpaced the Street view of $1.787 billion. Net sales increased 17% in the first quarter compared to the year-ago period and included a 3% favorable impact from currency. “First quarter total volumes were in line with our expectations, and we anticipate sequential improvement with growth building throughout the year, as we benefit from brand investments, increased innovation in both segments, and distribution gains,” said CEO Brendan M. Foley. Consumer segment sales rose 25% year over year to $1.145 billion, aided by acquisitions and currency gains. Organic growth was modest at 2%, primarily driven by pricing. Flavor Solutions segment sales increased 6% to $729 million. Adjusted gross profit in the quarter under review totaled $723.9 million, compared with $604.0 million a year ago. Adjusted gross margin expanded to 38.6% from 37.6% a year ago. Adjusted operating income increased 19% from the year-ago period to $267.6 million, while adjusted operating margin expanded to 14.3% from 14%. Multi-Billion Deal With Unilever McCormick and Unilever said Tuesday they have agreed to combine McCormick with Unilever’s Foods business, excluding India and certain other operations, forming a global flavor-focused company with about $20 billion in combined 2025 revenue. The merger excludes Unilever’s food operations in India, Nepal, and Portugal, as well as its Lifestyle & Nutrition segment, Buavita business, and Lipton Ready-to-Drink unit. Under the agreement, Unilever and its shareholders will receive equity representing 65% of the combined company, valued at $29.1 billion based on McCormick’s one-month volume-weighted average price of $57.84. Unilever will also receive $15.7 billion in cash. The deal implies an enterprise value of about $44.8 billion for Unilever Foods and $21.0 billion for McCormick, both at roughly 13.8 times fiscal 2025 EBITDA. Upon closing of the transaction, Unilever shareholders are expected to own 55.1%, McCormick shareholders will own 35.0%, and Unilever is expected to own 9.9% of the fully diluted combined company’s outstanding equity. Outlook “We remain on track to achieve our 2026 outlook and remain committed to our vision of being a global flavor leader, while continuing to drive shareholder value,” Foley said. McCormick affirms 2026 adjusted EPS guidance of $3.05–$3.13, in line with estimates of $3.09. The company also maintains its sales outlook of $7.73 billion–$8.00 billion, compared with estimates of $7.84 billion. MKC Price Action: McCormick & Co shares were down 5.30% at $50.19 at the time of publication on Tuesday. The stock is trading at a new 52-week low, according to Benzinga Pro data. Photo via Shutterstock