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Here's How Hershey (HSY) Looks Ahead of Q4 Earnings Release

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The Hershey Company HSY is likely to register top and bottom-line growth when it releases fourth-quarter 2020 numbers on Feb 4. The Zacks Consensus Estimate for revenues is pegged at approximately $2.1 billion, which suggests growth of 2.5% from the figure reported in the prior-year quarter. For 2020, the consensus mark is pegged at roughly $8.1 billion, indicating growth of around 1.3%.

The Zacks Consensus Estimate for the bottom line has fallen a cent in the past seven days to $1.43 per share, which however indicates a rise of 11.7% from the year-ago quarter’s reported figure. For 2020, the consensus mark is pegged at $6.22 per share, indicating an increase of 7.6%. Notably, Hershey’s bottom line has outperformed the Zacks Consensus Estimate by 8.8% in the last reported quarter and it has a trailing four-quarter earnings surprise of 6.2%, on average.

Hershey Company The Price, Consensus and EPS Surprise

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

Key Factors to Note

The company has been benefiting from strength in the North America segment, which gained from improved volumes and pricing in the third quarter of 2020. Volumes were driven by retailer inventory replenishment and strong consumer takeaway in everyday chocolate and baking products. Also, a focus on strengthening brands through innovation and buyouts has been aiding Hershey’s performance. Incidentally, gains from ONE Brands’ buyout (concluded in September 2019) drove the top line in the last reported quarter.

However, the company has been seeing weakness in the International segment for a while now. The segment was hurt by lower sales in the company’s owned retail locations. Although retail locations reopened during the quarter, footfall was low due to reduced consumer travel and capacity restrictions imposed by the government. Also, reduced air travel was a reason. We note that management’s sales guidance for 2020 includes a 2-point pandemic-related headwind in the International & Other segment. Moreover, volatile currency movements have been a headwind for the company. Per the last earnings call, unfavorable currency fluctuations are expected to have had a 0.5-point negative impact on sales growth in 2020. Apart from this, costs associated with COVID-19 are a concern.

Nonetheless, the company has been undertaking strategic pricing initiatives to improve its performance. Notably, improved pricing along with robust cost management helped Hershey counter commodity and warehouse-related cost pressure in the third quarter and boosted margins. Management projects net sales growth of nearly 1% for 2020. Further, the company envisions adjusted EPS for 2020 in the range of $6.18-$6.24. This view indicates a rise of 7-8% from the reported figure in 2019.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Hershey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hershey currently has a Zacks Rank #2 and an Earnings ESP of +1.79%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Newell Brands NWL has an Earnings ESP of +2.70% and a Zacks Rank #1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Monster Beverage MNST has an Earnings ESP of +21.81% and a Zacks Rank #3, at present.

Estee Lauder EL currently has an Earnings ESP of +1.69% and a Zacks Rank #3.

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Hershey Company The (HSY) : Free Stock Analysis Report

Newell Brands Inc. (NWL) : Free Stock Analysis Report

The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report

Monster Beverage Corporation (MNST) : Free Stock Analysis Report

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