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Hershey's (HSY) Pricing & Brand Strength Aid Amid High Costs
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The Hershey Company (HSY - Free Report) appears well-positioned due to the strength of its brands and solid pricing efforts amid elevated selling, marketing & administrative costs. The company has been strengthening its brand portfolio through meaningful acquisitions and innovations.
Along with its first-quarter 2023 results, management raised its net sales and earnings per share (EPS) guidance to the high end of its earlier guidance. The company now anticipates net sales growth of nearly 8% for 2023. Hershey envisions a reported EPS increase of nearly 15% and adjusted EPS growth of almost 11%.
Brand Strength
Hershey is a renowned producer of quality chocolate products in the United States, which markets some of the world’s leading brands. The company is also a global leader in sugar confectionery products, which form an attractive category as confectionery products are easily available, affordable and highly indulgent, making the industry almost recession-resistant.
Hershey’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly due to advertising investments, in-store merchandising, and programming and innovation. HSY regularly brings innovation to its core brands to meet consumer demand and needs not addressed by its current portfolio.
Hershey is committed to supporting brands through solid media marketing. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs.
Hershey has been undertaking buyouts to augment portfolio strength and boost revenues. In April 2023, the company signed an agreement to acquire two production facilities from Weaver Popcorn Manufacturing — a well-known leader in popcorn production and co-packing and a co-manufacturer of HSY’s SkinnyPop brand.
SkinnyPop has been witnessing impressive retail sales growth for ready-to-eat popcorn in the past three years. The move is likely to help Hershey sustain its robust growth in the SkinnyPop brand through supply-chain expansion.
In December 2021, Hershey acquired Dot’s Pretzels LLC — the owner of Dot’s Homestyle Pretzels, a leading brand in the pretzel category. The addition of Dot’s Pretzels is a perfect match for Hershey’s growing salty snacking portfolio. On its last earnings call, management highlighted that Dot’s Pretzel’s performance continued to remain solid, with retail sales growth of more than 25% in the first quarter of 2023, resulting in a pretzel category share gain of 100 basis points.
Image Source: Zacks Investment Research
Pricing Aids Amid High Expenses
Hershey has been undertaking strategic pricing initiatives to improve its performance. In the first quarter of 2023, the organic price contributed 8.9% to organic net sales growth. In the North America Confectionery unit, the organic price contributed 9.5% to organic net sales growth.
Moreover, in the North America Salty Snacks segment, the organic price contributed 10.9% to organic net sales growth. In the International segment, the organic price contributed 0.1% to organic net sales growth.
Hershey has been grappling with higher selling, marketing and administrative expenses for a while. In the first quarter of 2023, the company’s selling, marketing and administrative expenses rose 10.9% year over year on increased levels of media and capability investments. Advertising and related consumer marketing expenses moved up 8.8%, with higher investments across segments.
While elevated selling, marketing and administrative expenses are a concern, the abovementioned upsides are likely to help this Zacks Rank #3 (Hold) company continue with its growth story. Shares of HSY have rallied 8.1% in the past six months compared with the industry’s growth of 6.8%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.
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Hershey's (HSY) Pricing & Brand Strength Aid Amid High Costs
The Hershey Company (HSY - Free Report) appears well-positioned due to the strength of its brands and solid pricing efforts amid elevated selling, marketing & administrative costs. The company has been strengthening its brand portfolio through meaningful acquisitions and innovations.
Along with its first-quarter 2023 results, management raised its net sales and earnings per share (EPS) guidance to the high end of its earlier guidance. The company now anticipates net sales growth of nearly 8% for 2023. Hershey envisions a reported EPS increase of nearly 15% and adjusted EPS growth of almost 11%.
Brand Strength
Hershey is a renowned producer of quality chocolate products in the United States, which markets some of the world’s leading brands. The company is also a global leader in sugar confectionery products, which form an attractive category as confectionery products are easily available, affordable and highly indulgent, making the industry almost recession-resistant.
Hershey’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly due to advertising investments, in-store merchandising, and programming and innovation. HSY regularly brings innovation to its core brands to meet consumer demand and needs not addressed by its current portfolio.
Hershey is committed to supporting brands through solid media marketing. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs.
Hershey has been undertaking buyouts to augment portfolio strength and boost revenues. In April 2023, the company signed an agreement to acquire two production facilities from Weaver Popcorn Manufacturing — a well-known leader in popcorn production and co-packing and a co-manufacturer of HSY’s SkinnyPop brand.
SkinnyPop has been witnessing impressive retail sales growth for ready-to-eat popcorn in the past three years. The move is likely to help Hershey sustain its robust growth in the SkinnyPop brand through supply-chain expansion.
In December 2021, Hershey acquired Dot’s Pretzels LLC — the owner of Dot’s Homestyle Pretzels, a leading brand in the pretzel category. The addition of Dot’s Pretzels is a perfect match for Hershey’s growing salty snacking portfolio. On its last earnings call, management highlighted that Dot’s Pretzel’s performance continued to remain solid, with retail sales growth of more than 25% in the first quarter of 2023, resulting in a pretzel category share gain of 100 basis points.
Image Source: Zacks Investment Research
Pricing Aids Amid High Expenses
Hershey has been undertaking strategic pricing initiatives to improve its performance. In the first quarter of 2023, the organic price contributed 8.9% to organic net sales growth. In the North America Confectionery unit, the organic price contributed 9.5% to organic net sales growth.
Moreover, in the North America Salty Snacks segment, the organic price contributed 10.9% to organic net sales growth. In the International segment, the organic price contributed 0.1% to organic net sales growth.
Hershey has been grappling with higher selling, marketing and administrative expenses for a while. In the first quarter of 2023, the company’s selling, marketing and administrative expenses rose 10.9% year over year on increased levels of media and capability investments. Advertising and related consumer marketing expenses moved up 8.8%, with higher investments across segments.
While elevated selling, marketing and administrative expenses are a concern, the abovementioned upsides are likely to help this Zacks Rank #3 (Hold) company continue with its growth story. Shares of HSY have rallied 8.1% in the past six months compared with the industry’s growth of 6.8%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Kraft Heinz Company, a food and beverage product company, currently has a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 10.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.