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Hershey (HSY) Misses on Q4 Earnings, 2018 Guidance Upbeat
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The Hershey Company’s (HSY - Free Report) earnings and revenues missed the Zacks Consensus Estimate in fourth-quarter 2017 and also declined from the year-ago level. Nevertheless, the company will continue to invest in core brands and focus on strategies to drive growth.
Earnings & Revenue Discussion
Adjusted earnings per share of $1.03 missed the Zacks Consensus Estimate of $1.06 by 2.8%. Earnings declined 12% from the year-ago $1.17.
Net sales of $1.94 billion missed the Zacks Consensus Estimate of $1.97 billion. Net sales declined 1.6% year over year owing to the unfavorable timing of shipments last quarter and the sales increase from the Cookie Layer Crunch launch in the prior-year quarter. The sales decline breaks the streak of six straight quarters of improvement. Organically, excluding the impact of currency, sales fell 2%.
Volumes were down 2.3%. Meanwhile, net price realization had a favorable impact of 0.3% and currency drove revenues by 0.4%.
Quarterly Segment Discussion
North America (U.S. and Canada) net sales declined 0.9% to $1.67 billion. Currency benefited sales by 0.4% and pricing had a 0.3% positive impact. Meanwhile, volumes decreased 1.6%.
Fourth-quarter net sales at the International and Other segment declined 5.4% to $265 million. Currency had a positive impact on sales of 1.2%, while volumes posed a 6.6% headwind. Excluding currency, sales declined 6.6%.
Constant currency sales were solid (about 10%) in Mexico, Brazil and India. Net sales in China declined about 30% owing to volume declines.
Margins Detail
Adjusted gross margin declined 180 basis points (bps) to 42.7% due to unfavorable sales mix, higher freight and distribution costs, and other supply chain expenses.
Cost of sales dropped 9.8% to $1.1 billion in the fourth quarter. Again, total advertising and related consumer marketing expenses decreased 3.3% from fourth-quarter 2016. Adjusted operating margin contracted 240 bps to 16.8%.
Hershey Company (The) Price, Consensus and EPS Surprise
Kellogg Company (K - Free Report) is slated to report fourth-quarter numbers on Feb 8.
The Kraft Heinz Company (KHC - Free Report) is set to release fourth-quarter results on Feb 16.
B&G Foods (BGS - Free Report) is expected to report quarterly results on Feb 22.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Hershey (HSY) Misses on Q4 Earnings, 2018 Guidance Upbeat
The Hershey Company’s (HSY - Free Report) earnings and revenues missed the Zacks Consensus Estimate in fourth-quarter 2017 and also declined from the year-ago level. Nevertheless, the company will continue to invest in core brands and focus on strategies to drive growth.
Earnings & Revenue Discussion
Adjusted earnings per share of $1.03 missed the Zacks Consensus Estimate of $1.06 by 2.8%. Earnings declined 12% from the year-ago $1.17.
Net sales of $1.94 billion missed the Zacks Consensus Estimate of $1.97 billion. Net sales declined 1.6% year over year owing to the unfavorable timing of shipments last quarter and the sales increase from the Cookie Layer Crunch launch in the prior-year quarter. The sales decline breaks the streak of six straight quarters of improvement. Organically, excluding the impact of currency, sales fell 2%.
Volumes were down 2.3%. Meanwhile, net price realization had a favorable impact of 0.3% and currency drove revenues by 0.4%.
Quarterly Segment Discussion
North America (U.S. and Canada) net sales declined 0.9% to $1.67 billion. Currency benefited sales by 0.4% and pricing had a 0.3% positive impact. Meanwhile, volumes decreased 1.6%.
Fourth-quarter net sales at the International and Other segment declined 5.4% to $265 million. Currency had a positive impact on sales of 1.2%, while volumes posed a 6.6% headwind. Excluding currency, sales declined 6.6%.
Constant currency sales were solid (about 10%) in Mexico, Brazil and India. Net sales in China declined about 30% owing to volume declines.
Margins Detail
Adjusted gross margin declined 180 basis points (bps) to 42.7% due to unfavorable sales mix, higher freight and distribution costs, and other supply chain expenses.
Cost of sales dropped 9.8% to $1.1 billion in the fourth quarter. Again, total advertising and related consumer marketing expenses decreased 3.3% from fourth-quarter 2016. Adjusted operating margin contracted 240 bps to 16.8%.
Hershey Company (The) Price, Consensus and EPS Surprise
Hershey Company (The) Price, Consensus and EPS Surprise | Hershey Company (The) Quote
2017 Performance
Adjusted earnings per share of $4.76 increased from the year-ago level of $4.41 by 7.9%.
Net sales of $7.5 billion increased from the year-ago $7.4 billion.
2018 Guidance
Net sales are expected increase 5-7%. Adjusted gross margin will likely be in line with the 2017 level.
Savings from the Margin for Growth program are estimated at $55 million to $65 million in 2018.
Effective tax rate should be around 20% to 22%.
The company reaffirmed its adjusted EPS guidance at $5.33-$5.43, reflecting a 12-14% increase from last year.
Zack Rank & Upcoming Peer Releases
Hershey carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kellogg Company (K - Free Report) is slated to report fourth-quarter numbers on Feb 8.
The Kraft Heinz Company (KHC - Free Report) is set to release fourth-quarter results on Feb 16.
B&G Foods (BGS - Free Report) is expected to report quarterly results on Feb 22.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>