Hershey Co (NYSE: HSY) reported strong gross and operating margin expansion for the first quarter and raised its full-year margin guidance Thursday.
Margins were driven by higher-than-anticipated benefits from a decline in cocoa and dairy prices, as well as gains from SG&A efficiency and reduction in SKU complexity, according to Credit Suisse.
The chocolate manufacturer reported gross and operating margin expansion of 80bps and 160bps, respectively, for 1Q.
While reiterating its sales and EPS guidance for the year, Hershey raised the gross margin forecast from previous guidance for "modest" expansion to 60bps or better in expansion, Moskow said in a Friday note. (See his track record here.)
The food company also cited recent Nielsen data indicating a rebound in its candy sales growth in April and expressed confidence in achieving the objective of 1-2-percent growth for the year, the analyst said.
Credit Suisse raised its 2019 and 2020 EPS estimates from $5.57 to $5.73 and from $5.84 to $6.04, respectively.
Hershey’s first-quarter organic sales growth was reported at 2.3 percent, but would have been zero if not for the one-time benefit of the extended Easter holiday, Moskow said. Organic sales growth in the second half of 2019 is likely to be lower than in the first half, he said.
Hershey shares were up 1.14 percent at $123.72 at the time of publication Friday.
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