The Hershey Company, based in Pennsylvania, has recently faced scrutiny from investors as its stock performance raises questions about its future. While the company reported better-than-expected quarterly results on October 30, 2023, its stock, identified by the ticker HSY, dipped by 2.4% in the trading session that followed. This decline comes despite a solid sales momentum, highlighting the challenges Hershey continues to face in the current market environment.
Hershey operates with a market capitalization of approximately $33.6 billion and segments its operations into North America Confectionery, North America Salty Snacks, and International markets. Over the past year, HSY has notably underperformed the broader market, experiencing a 5.7% decline compared to a 15.6% gain in the S&P 500 Index year-to-date. Despite outperforming the Consumer Staples Select Sector SPDR Fund, which fell 6.1% during the same period, Hershey’s stock performance is concerning for investors.
In its recent financial disclosures, Hershey revealed a strong sales increase, with organic constant currency sales rising 6.2% compared to the same quarter last year. The overall revenue surged by 6.5% year-over-year to $3.2 billion, exceeding analysts’ expectations by 1.8%. Nonetheless, the adjusted earnings per share (EPS) fell 44.4% year-over-year to $1.30, even while surpassing consensus estimates by a remarkable 19.3%.
Investors reacted negatively to the company’s decision not to significantly improve its full-year earnings guidance. Analysts predict an adjusted EPS of $5.98 for the fiscal year ending December 2025, reflecting a 36.2% decline from the previous year. Despite this, Hershey has a history of exceeding earnings expectations, having beaten analysts’ bottom-line estimates for four consecutive quarters.
Analyst Sentiment and Future Projections
The sentiment among analysts covering Hershey appears cautious yet slightly optimistic. Currently, among the 22 analysts monitoring HSY, the consensus rating is a “Hold,” which includes three “Strong Buys,” 17 “Holds,” and two “Strong Sells.” This marks a shift from two months prior when there was only one “Strong Buy” and four “Strong Sell” recommendations.
On November 1, 2023, Robert Moskow, an analyst at TD Cowen, reiterated a “Hold” rating on Hershey but adjusted the price target downward from $204 to $200. The mean price target currently stands at $188.57, suggesting an 11% premium over current price levels. The highest target set by analysts is $220, indicating a potential upside of 29.5% if the stock performance improves.
As Hershey navigates these challenges, the market will be closely watching its ability to adapt and improve its financial outlook. The company’s performance in the coming quarters will be critical in determining whether it can regain investor confidence and align more closely with broader market trends.
