On Mar 5, 2014, we issued an updated research report on The Hershey Company (HSY).
On Jan 30, the chocolate giant reported better-than-expected fourth-quarter results beating the Zacks Consensus Estimate for both earnings and revenues. The company also raised the lower end of its earnings per share guidance for 2014.
Hershey’s fourth-quarter 2013 adjusted earnings of 86 cents per rose 16.2% year over year driven by solid revenue growth which made up for softer margins and higher taxes. Revenues also grew 11.7% year over year, rebounding from a relatively softer performance in the third quarter. A solid holiday season in North America and stronger-than-expected international growth led to the sales increase.
Hershey expects another year of top-line growth and margin expansion in 2014. Growth is expected to be driven by continued momentum in core brands, several product launches and accelerated investments in international markets.
Estimates for this Zacks Rank #2 (Buy) company mostly moved upwards in response to the solid quarterly result and a bullish outlook for 2014. The Zacks Consensus Estimate for fiscal 2014 and 2015 increased 0.5% and 1.0%, respectively, over the last 60 days.
Overall, Hershey’s strong brand positioning, strategic marketing investments in core brands, disciplined innovation and consumer capabilities make it attractive.
Despite accelerating its investments in overseas markets, particularly in Mexico, Brazil, India and China, other snacks companies like Mondelez International, Inc (MDLZ) have a stronger presence outside North America. Also, though Hershey is significantly progressing in international markets, its international profits have not been strong enough due to increased investments in brand building and route to market expansion.
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