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Hershey's (HSY) Q4 Earnings Surpass Estimates, Sales Up

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The Hershey Company HSY reported robust fourth-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. Results gained from solid performance in the North America segment.

Q4 in Details

Adjusted earnings per share (EPS) of $1.49 came ahead of the Zacks Consensus Estimate of $1.43 and increased 16.4% year over year.

Consolidated net sales of $2,185.2 million increased 5.7% year over year and surpassed the Zacks Consensus Estimate of $2,120.1 million. Price realization and volume growth were 0.6 point and 5.7 point, respectively. However, the impact of divestitures was negative to the tune of 0.2 point due to divestitures of Krave and the Scharffen Berger and Dagoba brands. Also, unfavorable foreign currency rates affected sales by 0.4 point. Further, organic sales on a constant-currency (cc) basis increased 6.3%.

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


Adjusted gross margin expanded 50 basis points (bps) to 43.9% on the back of favorable pricing and volume. Selling, marketing and administrative costs increased 4% due to increased advertising in the North America segment. Advertising and related consumer marketing expenses increased 4.9%. Selling, marketing and administrative costs excluding advertising and related consumer marketing increased 3.5%. Charges in relation to its International Optimization Program were a reason.

Adjusted operating profit amounted to $429.3 million, up 15.9% from the prior-year quarter’s figure. Adjusted operating profit margin expanded 170 bps to 19.6% led by solid volume gains in the North America segment.

Segmental Update

North America (the United States and Canada) net sales increased 8.9% year over year to $1,973.9 million. Markedly, price realization contributed 1.1 point benefit, while volumes contributed 7.9 points driven by solid seasonal performance. Moreover, favorable currency boosted sales in the unit by 0.1 point. However, impact of divestiture dented the unit by 0.2 point.

Net sales in the International and Other segment fell 17.3% to $211.3 million. On a cc basis, net sales declined 13.1%. Volumes hit sales by 10.1 points, mainly due to lower sales in the company's owned retail locations. Although retail locations reopened during the third quarter of 2020, footfall was low stemming from reduced consumer travel and capacity restrictions imposed by government. Combined net sales in Mexico, Brazil, China and India, dropped 28.7%. Excluding currency headwinds, combined organic sales from these markets decreased nearly 19.8% at cc. Also, unfavorable net price realization of 3.0 points was a drag.

Financials

Hershey ended the quarter with cash and cash equivalents of $1,144 million, long-term debt of $4,089.8 million and total shareholders’ equity of $2,237.9 million.

In a separate press release, the company declared a quarterly dividend of 80.4 cents per share for its common stock and 73.1 cents for Class B common stock. These are payable on Mar 15, 2021 to shareholders of record as of Feb 19. Notably, this marks the company’s 365th and 146th straight dividend payout on its common stock and Class B common stock, respectively.

2021 Outlook

Hershey expects its 2021 performance to be in line with its long-term growth algorithm. For 2021, it expects net sales to rise 2-4% and projects EPS growth of 6-8%.


In the North America segment, the company anticipates the recent momentum to continue into the first quarter of 2021 on the back of increased sales of take home and seasonal chocolate along with added marketplace share gains. However, management expects the second-quarter and second-half performances to be moderate owing to strong 2020 performance. In the International & Other segment, Hershey anticipates a stable sales trend in majority of its markets. That said the speed and magnitude of recovery remains uncertain for the segment. Also, the company expects capital expenditure of nearly $550 million owing to key initiatives like the ongoing ERP transformation and supply chain initiatives.

Shares of this Zacks Rank #3 (Hold) company have gained 3% in the past six months compared with the industry’s growth of 5%.

Better-Ranked Food Stocks

Darling Ingredients DAR, a Zacks Ranked #2 (Buy) stock, has a trailing four-quarter earnings surprise of 26.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hain Celestial HAIN currently carries a Zacks Rank #2 and has a trailing four-quarter earnings surprise of 24.6%, on average.

Medifast, Inc. MED — also carrying a Zacks Rank #2 at present — has a trailing four-quarter earnings surprise of 20.2%, on average.

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Hershey Company The (HSY) : Free Stock Analysis Report

The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report

Darling Ingredients Inc. (DAR) : Free Stock Analysis Report

MEDIFAST INC (MED) : Free Stock Analysis Report

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