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Hershey Adds Flavor to Snacks Business With ONE Brands Buyout

Zacks Equity Research

The Hershey Company HSY focuses on solidifying its footing in the snacking category, evident from its acquisition of ONE Brands, LLC. The company’s deal to buy this maker of low-sugar, high-protein nutrition bars is anticipated to conclude in the fourth quarter of 2019.

The deal, worth nearly $397 million, will be sponsored through cash and short-term borrowings. Further, the inclusion of ONE Brands is expected to augment earnings slightly in the first full year following the acquisition.

ONE Brands to Strengthen Hershey’s Portfolio

The buyout of ONE Brands is likely to enhance Hershey’s competitive position by enriching its portfolio with the addition of the nutrition bar category. To this end, One Brands’ Birthday Cake, Peanut Butter Pie and Maple Glazed Doughnut flavors are expected to be a deemed fit in Hershey’s snacking category.

The company has been focusing beyond the confectionary category, on the growing market for healthy snacks items, for quite some time. In this regard, Hershey acquired Amplify Snack Brands in January 2018, which is steadily contributing to its top line. With several plans rolled up its sleeves to further strengthen the Amplify brands, Hershey expects greater yields from this buyout in the forthcoming periods.

Also, in September 2018, the company acquired Pirate Brands, which is also augmenting the snacking business. In earlier developments, the acquisition of New York-based barkTHINS (April 2016) premium chocolate snacking brand has been aiding the company’s better-for-you snacks portfolio.

Apart from Hershey, another food company that is increasing focus on the growing snacks business is Campbell Soup CPB. Notably, Campbell is committed to shifting its overall portfolio toward the fast-growing snacking category, which is expected to form about half of its proforma sales in the future. Campbell’s Snyder's-Lance acquisition is enhancing the performance of the global biscuits and snacks portfolio. The company expects brands under the snacking category to continue boosting performance, backed by enhanced marketing and innovation.

Clearly, the snacking category is gaining traction, and we expect Hershey’s takeover of ONE Brands to fortify its presence in this growing business arena, fueling momentum for this Zacks Rank #2 (Buy) stock. The stock has rallied 65.2% in the past year, outperforming the industry’s growth of about 57%.

Looking for More? Check These Solid Food Stocks

General Mills GIS, with a Zacks Rank #2, has a long-term EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MEDIFAST MED, also with a Zacks Rank #2, has delivered positive earnings surprise in the trailing three quarters.

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