Declining Performance: Analyzing The Hershey Company’s Challenges
A Closer Look at Financial Trends and Market Position
With a market capitalization of $36.2 billion, The Hershey Company (HSY) stands as a prominent producer of chocolate and non-chocolate products, alongside a variety of snacks and pantry items. Based in Hershey, Pennsylvania, the company operates in three segments: North America Confectionery, North America Salty Snacks, and International, offering a range of beloved brands.
Over the past year, HSY shares have struggled compared to the overall market. Specifically, HSY has fallen 9.6% in value, while the S&P 500 Index ($SPX) has posted a sizable 32.3% gain. In 2024 alone, HSY shares have dipped 4%, contrasting with SPX’s notable 24.7% rise so far this year.
Breaking it down further, HSY has also underperformed against the Consumer Staples Select Sector SPDR Fund’s (XLP) 14.5% increase in the last year and its 12% return for the current year-to-date.
On November 7, shares of Hershey dropped 2.3% following disappointing Q3 2024 results. The earnings reported were $2.34 per share, alongside net sales around $3 billion. Factors such as high cocoa prices, reduced sales volumes, and struggles in critical areas—particularly in North America Salty Snacks and International segments—contributed to this downturn. Additionally, the company updated its annual forecast, predicting stagnant net sales and a mid-single-digit decrease in adjusted earnings per share (EPS), which further unsettled investors.
The outlook for the fiscal year ending in December anticipates a 5.5% decline in EPS, expected to fall to $9.06. Historically, Hershey’s earnings surprises have been mixed; the company has outperformed consensus estimates in two out of the last four quarters while missing the target in the other two.
Among the 22 analysts evaluating the stock, the overall recommendation is to maintain a “Hold.” This assessment is derived from one “Strong Buy” rating, 17 “Holds,” one “Moderate Sell,” and three “Strong Sells.”
This outlook shows a softer stance compared to three months ago, where the stock had three “Strong Buy” recommendations.
On November 11, DA Davidson downgraded Hershey’s price target to $187 and maintained a “Neutral” rating. The firm raised concerns regarding increasing competition and the long-term impacts of GLP-1 drug adoption on market share.
The average price target stands at $181.95, which indicates a modest 2.8% premium over HSY’s current pricing, while the highest expected price target of $222 suggests a potential upside of 25.4% from today’s values.
On the date of publication, Sohini Mondal did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For further details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
