What to Expect From Hershey’s Q3 Report

RBC Capital analysts reiterated their Sector Perform rating and maintained a $205 price target on Hershey (NYSE:HSY) stock, following recent channel checks that revealed competitor Mars plans to implement a price increase across its entire portfolio in December.

Hershey had previously announced a 12% price increase on about 50% of its portfolio, effective in November, excluding instant consumables. Mars, however, will be raising prices across its entire lineup, including instant consumables, with increases ranging from 10-11% on chocolate, 11-12% on non-chocolate items, 16% on gum, and 10% on mints.

The analysts noted that while this pricing strategy is a near-term positive for Hershey, they remain cautious about the potential for consumers to move away from the chocolate category due to rising prices, which could lead Hershey to spend more on marketing to regain market share in the future.

RBC Capital analysts reiterated their Sector Perform rating and maintained a $205 price target on Hershey (NYSE:HSY) stock, following recent channel checks that revealed competitor Mars plans to implement a price increase across its entire portfolio in December.

Hershey had previously announced a 12% price increase on about 50% of its portfolio, effective in November, excluding instant consumables. Mars, however, will be raising prices across its entire lineup, including instant consumables, with increases ranging from 10-11% on chocolate, 11-12% on non-chocolate items, 16% on gum, and 10% on mints.

The analysts noted that while this pricing strategy is a near-term positive for Hershey, they remain cautious about the potential for consumers to move away from the chocolate category due to rising prices, which could lead Hershey to spend more on marketing to regain market share in the future.

Hershey (NYSE:HSY) shares fell nearly 2% pre-market today after Jefferies analysts downgraded the company to Underperform from Hold, lowering their price target to $163 from $184.

The analysts explained that Hershey is facing significant challenges, with the company projecting mid-single-digit price increases in its North American confectionery segment for 2025. This is expected to widen the price gap between Hershey’s products and other snack categories, at a time when consumers are opting for more affordable snacks. While Hershey is focusing on holiday-related sales, consumer participation in these events has diminished compared to pre-pandemic levels. Additionally, everyday chocolate purchases are declining, especially among low-income consumers, adding pressure to various segments of Hershey's chocolate portfolio. The analysts noted that Hershey faces numerous headwinds with limited upside potential, increasing the likelihood of downward earnings revisions.

Hershey (NYSE:HSY) shares fell nearly 2% pre-market today after Jefferies analysts downgraded the company to Underperform from Hold, lowering their price target to $163 from $184.

The analysts explained that Hershey is facing significant challenges, with the company projecting mid-single-digit price increases in its North American confectionery segment for 2025. This is expected to widen the price gap between Hershey’s products and other snack categories, at a time when consumers are opting for more affordable snacks. While Hershey is focusing on holiday-related sales, consumer participation in these events has diminished compared to pre-pandemic levels. Additionally, everyday chocolate purchases are declining, especially among low-income consumers, adding pressure to various segments of Hershey's chocolate portfolio. The analysts noted that Hershey faces numerous headwinds with limited upside potential, increasing the likelihood of downward earnings revisions.

Thomas Palmer of Coker Palmer recently updated the price target for Hershey (HSY:NYSE) to $204, suggesting a potential upside of about 5.31% from its current trading price of $194.65. This adjustment, as reported by TheFly, reflects a growing confidence in Hershey's financial future, particularly after the company's impressive start to 2024. Hershey's first-quarter earnings and sales figures have notably exceeded expectations, setting a positive tone for the company's performance in the year ahead.

Hershey's financial success in the first quarter is attributed to a 3.7% increase in adjusted earnings, reaching $3.07 per share, which surpassed the Zacks Consensus Estimate of $2.74. This achievement is a result of growth across all of Hershey's business segments, underpinned by the company's strategic investments in innovation, marketing, and in-store execution. These efforts have not only improved consumer engagement but also bolstered Hershey's market share, demonstrating the effectiveness of its business strategies.

Moreover, the introduction of a new ERP (Enterprise Resource Planning) system marks a significant step towards enhancing Hershey's operational agility and efficiency. Despite facing business volatility, Hershey's management remains dedicated to its strategic initiatives, which have been instrumental in achieving positive price realization. This factor, along with increased demand for sweets in the North American market, contributed to a substantial 36.5% increase in diluted earnings per share (EPS), reaching $3.89, and an 8.9% rise in revenue to $3.25 billion.

Hershey's pricing strategy, which involved raising prices to offset the rising costs of key commodities like sugar and cocoa, has proven effective. This approach, similar to that of other packaged food companies, has met with minimal resistance from consumers, even during significant holidays when demand for Hershey's products typically surges. The company's ability to maintain steady consumer interest in its chocolates and candies, despite higher prices, underscores the strength of its brand and product offerings.

The stock's performance, with a decline to $194.65, reflects investor reactions to Hershey's cautious guidance for the future, despite its strong start to the year. With a market capitalization of about $40.37 billion and a trading volume of 3.39 million shares on the NYSE, Hershey's financial health and strategic positioning suggest a promising outlook, aligning with Thomas Palmer's revised price target. This financial trajectory, characterized by robust sales growth in North America and effective management of international market challenges, positions Hershey favorably in the competitive confectionery and snacks market.

Hershey Foods (NYSE:HSY) shares rose nearly 5% since the company reported its Q1 results last week, with EPS of $2.96 coming in better than the Street estimate of $2.67. Revenue was $2.99 billion, compared to the Street estimate of $2.9 billion.

Given the strong start to the year and increased visibility into customer demand and supply chain costs (although cocoa and sugar prices have started to go up), the company was able to raise its guide to the top end of its initial range.

The company expects full 2023-year EPS to be in the range of $9.29-$9.46, compared to the Street estimate of $9.41.

Hershey Foods (NYSE:HSY) shares rose nearly 5% since the company reported its Q1 results last week, with EPS of $2.96 coming in better than the Street estimate of $2.67. Revenue was $2.99 billion, compared to the Street estimate of $2.9 billion.

Given the strong start to the year and increased visibility into customer demand and supply chain costs (although cocoa and sugar prices have started to go up), the company was able to raise its guide to the top end of its initial range.

The company expects full 2023-year EPS to be in the range of $9.29-$9.46, compared to the Street estimate of $9.41.