McCormick & Company beat Wall Street's profit and sales targets for its fiscal third quarter on Thursday, but shares of the spice and seasoning giant tumbled roughly 3 percent to their lowest level since December 2016 after executives warned that a cyclospora outbreak at quick-service restaurants and higher gas prices have softened demand heading into the holiday baking season.

The Hunt Valley, Maryland-based company reported adjusted earnings of 86 cents a share on net sales of $2.02 billion for the quarter ended August 31, topping analyst estimates of 76 cents and $1.98 billion. Reported net sales jumped 17.4 percent year over year, but that growth leaned heavily on the recently closed McCormick de Mexico acquisition and a favorable currency swing rather than organic demand, which rose just 1.9 percent on pricing alone. Organic volumes actually slipped 0.3 percent, dragged down by a 2.5 percent volume decline in the flagship Consumer Americas segment, the company's only unit to post negative volume growth.

GAAP diluted earnings per share fell to 36 cents from 84 cents a year earlier after McCormick booked $141.5 million in special charges, the largest piece a $43.1 million non-cash impairment tied to shutting down a development-stage pepper-sourcing and agricultural-technology project in Malaysia that the company said no longer made economic sense amid shifting supply conditions, according to its filing with the SEC.

Guidance held, but warning signs flagged

Despite the mixed quarter, McCormick reaffirmed its full-year fiscal 2026 outlook for the third straight quarter, still projecting adjusted earnings per share of $3.05 to $3.13 and reported net sales growth of 13 to 17 percent, according to the company's official earnings release. Executives also said rising commodity and freight costs are expected to squeeze margins further in the fourth quarter.

Higher gas prices and the cyclospora outbreak have added pressure and contributed to softer traffic across retail and foodservice channels.

Barclays analysts flagged the same soft spot, noting that a "slower-than-anticipated volume recovery in Consumer Americas will likely remain top of mind" for investors tracking the stock, which has now fallen roughly 32 percent so far this year.

The quarter also brought an update on McCormick's pending $44.8 billion combination with Unilever's global foods business, the deal announced in March that would fold Hellmann's and Knorr into McCormick's spice empire. Management said integration planning remains on track for a mid-2027 close, with leadership named and more than 200 employees already mobilized toward a targeted $600 million in annual run-rate cost synergies and earnings accretion in the first year after closing.

For now, investors are weighing a company caught between near-term consumer softness and a transformative merger still nine months from closing. McCormick's next scheduled update comes with fiscal fourth-quarter results in January, when the Unilever deal's regulatory progress and the holiday-season sales rebound will both be under scrutiny.