The Hershey Company (HSY), headquartered in Hershey, Pennsylvania, manufactures and sells chocolate, confectionery products, and pantry items. Valued at $36.82 billion by market cap, the company's primary products include chocolate and sugar confectionery products, gum and mint refreshment products, baking ingredients, toppings, and beverages.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and HSY perfectly fits into that category, signifying its substantial size, stability, and dominance in its industry. HSY has over 90 brand names in its portfolio and is in approximately 80 countries.
The leading snack maker has fallen 30.4% from its 52-week high of $261.58, which it hit on Jun. 27, 2023. Shares of HSY are down 5.8% over the past three months, underperforming the broader S&P 500 Cons Staples Sector SPDR (XLP) 2.3% gains over the same time frame.
Longer term, HSY has declined 28% over the past year and in 2024, the stock is up marginally. By contrast, the XLP is up 7.4% on a YTD basis and 4.9% over the past 52 weeks.
The stock has been trading below its 50-day and 200-day moving averages since early June to confirm the bearish price trend.
On May 3, HSY reported robust Q1 results. Its net income was $797.50 million, and adjusted EPS stood at $3.07, beating the consensus estimate of $2.74. The company’s net sales were $3.25 billion, surpassing the Wall Street estimates of $3.12 billion. HSY expects its full-year EPS to be $9.59. The stock closed up more than 1% on the day the results were released.
HSY’s overall performance can be attributed to the rise in cocoa prices. Factors such as flooding, crop disease, and droughts in West Africa, a major cocoa producer, have led to a global supply crunch that has driven up the prices considerably. HSY has said that rising cocoa costs could hurt its profits this year. HSY and other major candy companies are protected from soaring cocoa prices through long-term contracts, but they could likely be forced to pay more for the produce in 2025.
Rival Mondelez International, Inc. (MDLZ) has outperformed HSY with 8.1% losses over the past 52 weeks. However, HSY’s gains on a YTD basis outshine MDLZ’s 7.3% losses over this period.
After its recent underperformance compared to the consumer staples sector, analysts are cautious about HSY’s prospects. The stock has a consensus rating of “Hold” from the 22 analysts covering it, but the mean price target of $208 is a 14.2% premium to current levels.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
