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Will Buyouts & Savings Drive Hershey's (HSY) Q2 Earnings

Zacks Equity Research

The Hershey Company HSY is scheduled to release second-quarter 2019 results on Jul 25. The renowned chocolate provider has a mixed record of earnings surprises in the trailing four quarters. In the last reported quarter, the company delivered positive earnings surprise of 7.4%. Let’s see how things are placed ahead of the upcoming quarterly announcement.

Estimates Reveal Bright Prospects

The Zacks Consensus Estimate for earnings has remained stable in the past 30 days at $1.18, which indicates 3.5% growth from the year-ago quarter’s figure. The consensus mark for revenues is pegged at $1,763 million, suggesting a rise of 0.6% from the year-ago quarter’s level.

Factors Likely to Impact Results

Buyouts have been boosting Hershey’s portfolio. Notably, the company’s top line is steadily gaining from Amplify Snack Brands. The buyout has strengthened the company’s footing in the fast-growing market for healthy snacks. Hershey’s acquisition of Pirate Brands from B&G Foods BGS, has also aided augmenting snacking business. Continued endeavors to strengthen these banners are likely to yield positive results. Management had stated that it expects net positive impact from buyouts and divestitures of roughly 0.5 point on net sales in 2019.

We expect these buyouts to continuously boost the top line in the quarter under review. Performance is also likely to benefit from newly-launched products across different markets to meet consumers’ specific needs. Moreover, advancements in the e-commerce channel and benefits from net price realization are likely to drive growth.

Apart from efforts to enhance revenue scope, Hershey has been engaging in strategies to bolster profitability. In this context, the company is progressing with SKU rationalizing efforts. In addition, it is on track with the Margin for Growth multi-year program. Per this multi-year initiative, the company focuses on streamlining the operating model. Management expects overall savings of approximately $150-$175 million from the initiative. This is likely to contribute favorably in the impending quarter.

Hershey Company (The) Price, Consensus and EPS Surprise


Hershey Company (The) Price, Consensus and EPS Surprise

Hershey Company (The) price-consensus-eps-surprise-chart | Hershey Company (The) Quote


What Does the Zacks Model Say?

Our proven model doesn’t show that Hershey is likely to beat bottom-line estimates in to-be-reported quarter.  For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Though Hershey carries a Zacks Rank #3, its Earnings ESP of -0.70% makes surprise prediction difficult.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Kimberly-Clark Corporation KMB has an Earnings ESP of +0.31% and a Zacks Rank #2.

Estee Lauder EL has an Earnings ESP of +6.58% and a Zacks Rank #3.

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Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
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