Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0792
    -0.0037 (-0.35%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2624
    -0.0014 (-0.11%)
     
  • USD/JPY

    151.4320
    +0.1860 (+0.12%)
     
  • Bitcoin USD

    70,891.78
    +1,493.03 (+2.15%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Hershey (HSY) Up 4.5% Since Earnings Report: Can It Continue?

Best Buy (BBY) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

It has been about a month since the last earnings report for The Hershey Company  HSY. Shares have added about 4.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Third Quarter 2017 Results
 
Hershey’s earnings and revenues beat the Zacks Consensus Estimate in third-quarter 2017. Growth in its core brands, successful innovation and progress in multi-year productivity, and cost-saving initiatives drove the outperformance.
 
Earnings & Revenue Discussion
 
Hershey’s third-quarter adjusted earnings per share of $1.33 beat the Zacks Consensus Estimate of $1.28 by 3.9%. Earnings also improved from the year-ago level of $1.29 by 3.1%.
 
Net sales of $2.03 billion surpassed the Zacks Consensus Estimate of $2 billion. Net sales also improved 1.5% year over year owing to strong demand for Kisses, Kit Kat and Chocolate Dipped Pretzels. This marked the sixth straight quarter of sales rise after a few quarters of no growth.
 
Organically, excluding the impact of currency, sales increased 1.1% as demand strengthened in the United States.
 
Volume grew 0.7%, while net price realization had a 0.4% benefit. Currency favorably impacted revenues by 0.4%.
 
Quarterly Segment Discussion
 
North America (United States and Canada) net sales increased 1.6% to $1.79 billion and currency drove sales by 0.3%. Pricing made a 0.3% positive impact, while volumes contributed 1.6%.
 
Third-quarter net sales at the International and Other segment grew 0.8% to $240.7 million. Currency had a positive impact on sales of 1.3%. Excluding currency, sales declined 0.5% due to pricing gains. While volumes posed a 5.2% headwind, pricing benefited sales by 4.7%.
 
Constant currency sales were solid (about 8%) in Mexico, Brazil and India. Net sales in China remained on par with the year-ago level.
 
Margins Detail
 
Hershey’s adjusted gross margin declined 30 basis points (bps) to 45.3% due to higher freight rates as well as manufacturing and distribution costs. Again, unfavorable sales mix had a negative impact on gross margins.
 
Cost of sales dropped 5.2% to $1.1 billion in the third quarter. Again, total advertising and related consumer marketing expenses increased 3.7% from the third-quarter 2016 level.
 
Adjusted operating margin contracted 30 bps to 22%.
 
The adjusted effective tax rate was 30.4%, lower than 30.7% in the prior-year quarter.
 
Hershey’s also approved a new $100-million stock repurchase authorization.
 
2017 Guidance
 
Net sales are expected to increase around 1.25%. Adjusted gross margin will likely increase about 25 bps compared with the prior expectation of about 50 bps.
 
The company now expects foreign currency to have a neutral effect on sales. Previously, it was expected at around 0.25%.
 
The company reaffirmed its adjusted EPS guidance at the range of $4.72-$4.81, reflecting a 7-9% increase from last year.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Hershey's stock has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Hershey Company (The) (HSY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Advertisement