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Stifel reaffirms steady stock target on Hershey despite Q3 earnings miss

EditorNatashya Angelica
Published 08/11/2024, 12:36 am
HSY
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On Thursday, Stifel maintained its Hold rating on Hershey shares with a steady price target of $180.00. The company's third-quarter earnings for 2024 showed a decrease of 10% in earnings per share (EPS), falling short of both the firm's and consensus estimates by $0.24 and $0.22, respectively. Hershey's organic revenue saw a 1% decline, with volume and mix down by 3%, although this was slightly offset by a 2% increase due to pricing adjustments.

North American Confectionery's organic revenue increased by 0.9%, while North American Salty Snacks faced a significant 15.5% decline. International sales experienced a modest rise. Hershey's gross margin contracted by 460 basis points to 40.3% compared to the previous year. This contraction was attributed to rising commodity costs, operational deleverage, and an unfavorable mix, although pricing strategies and productivity savings provided some offset.

The company's operating profit fell by 13.2% due to factors impacting the margin, despite cost savings and reduced compensation expenses helping to mitigate the decline.

Hershey has revised its full-year 2024 guidance downwards, now anticipating flat net sales, a revision from the approximately 2% growth previously expected. Moreover, the company projects a mid-single digit decrease in EPS, a steeper decline than the slight decrease forecasted earlier.

For further details, Hershey has made pre-recorded remarks available, and a conference call was scheduled for 8:30 am Eastern Time, accessible via phone numbers 877-407-3982 (domestic) and 201-493-6780 (international), with the passcode 13742417.

In other recent news, Hershey Co (NYSE:HSY). has revised its yearly revenue and profit forecasts downward, due to reduced demand for its products following price increases. The company reported third-quarter earnings of $2.34 per share, which fell short of the expected $2.56 per share, and a 1.4% decrease in total net sales to $3 billion, missing the average analyst estimate of $3.08 billion.

Hershey now expects its full-year net sales growth to remain flat, adjusting down from an earlier projection of approximately 2% growth.

In response to these challenges, Hershey has announced a cost-reduction strategy targeting $300 million in savings by 2026. Despite the difficulties, the company has declared its latest round of quarterly dividends, with payouts of $1.370 per share for its Common Stock and $1.245 per share for its Class B Common Stock. This announcement underscores Hershey's financial stability and commitment to providing shareholder value.

In light of recent developments, CEO Michele Buck stated that the company's priorities are to drive top-line and market share growth. This strategy includes expanding the chocolate portfolio and maximizing seasonal strength. These are the recent highlights for Hershey Co.

InvestingPro Insights

Recent InvestingPro data provides additional context to Hershey's current financial situation. The company's market capitalization stands at $35.77 billion, with a P/E ratio of 19.68. This valuation comes as Hershey trades near its 52-week low, with the stock price at 83.44% of its 52-week high.

Despite the challenges outlined in the earnings report, InvestingPro Tips highlight some positive aspects of Hershey's financial health. The company has maintained dividend payments for 54 consecutive years and has raised its dividend for 14 consecutive years. This commitment to shareholder returns is reflected in the current dividend yield of 3.1%, which may be attractive to income-focused investors.

However, aligning with the company's revised guidance, InvestingPro Tips note that 13 analysts have revised their earnings downwards for the upcoming period. This corroborates the cautious outlook presented in Hershey's earnings report and the subsequent hold rating from Stifel.

For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Hershey, providing a deeper understanding of the company's financial position and market performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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