Core Viewpoint - The Hershey Company has faced significant challenges in the past six months, with a stock price decline of 0.7%, contrasting with the broader industry and S&P 500 performance [1] Financial Performance - Hershey's stock closed at $190.52, down 10.1% from its 52-week high of $211.92, and has fallen below critical technical thresholds [2] - Analysts have revised down the Zacks Consensus Estimate for fiscal 2024 by 0.7% to $9.49 and for fiscal 2025 by 1.1% to $9.32 per share, indicating projected year-over-year earnings declines of 1.04% and 1.83% respectively [3] Market Challenges - The company experienced a 20.7% decline in North American confectionery net sales in Q2 2024, reflecting weakened consumer demand [4] - Rising input costs, particularly for cocoa and sugar, have led to a 200 basis point contraction in adjusted gross margin year-over-year in Q2 [5] Segment Performance - Despite challenges, the confectionery segment has shown resilience with a 2% increase in retail sales in the Candy, Mint & Gum category year-to-date [6] - The North America Salty Snacks segment performed well with 8% retail sales growth in Q2 2024, contributing to a 22-basis point market share gain [7] Innovation and Future Outlook - Hershey's innovation pipeline for the second half of 2024 includes new products expected to drive sales and momentum, particularly in the gummy and sweets segment [8] - The company anticipates mid-single-digit sales growth for the North America Salty Snacks segment in full-year 2024, driven by innovation [7] Investment Considerations - Current pressures from rising input costs and shrinking margins make Hershey's stock less attractive for new investors, although its core business remains strong [9]

Group 1 - Jefferies analysts downgraded Hershey to underperform and reduced their price target from $184 to $163, representing a nearly 15% decrease from the company's closing price [1] - Chocolate is lagging behind other snack categories in volume growth, with consumers opting for more cost-effective snacks like potato chips, pretzels, and cookies [1][2] - The rising price of cocoa, which has reached all-time highs due to poor harvests, is significantly increasing input costs for chocolate producers [2] Group 2 - Hershey's shares have increased by approximately 2% this year but have declined over the past 12 months [2]

Core Viewpoint - Hershey's stock has dropped over 25% due to various challenges, but this presents a potential opportunity for long-term investors willing to look beyond short-term issues [1] Group 1: Cocoa Price Inflation - Rising cocoa prices, a key ingredient for Hershey's products, are a significant concern as they have not started to decline materially [2] - The cocoa production sector is facing issues such as lack of investment, aging trees, and crop illnesses, contributing to sustained high prices [2] Group 2: Distribution System Update - Hershey's recent update to its distribution system has temporarily affected earnings due to inventory buildup prior to the switch, which is now being worked down [3] - This transition is expected to normalize operations and order flow in the future [6] Group 3: Market Trends and Consumer Behavior - A shift in consumer preferences towards more filling snacks has led to a slowdown in popcorn sales, which was previously a growth driver for Hershey [3] - The emergence of new weight loss drugs poses a potential long-term risk to confectionery demand, although adherence to such medications may vary among consumers [4][6] Group 4: Dividend Growth and Investment Potential - Despite current challenges, Hershey's dividend yield is near its highest levels in the past decade at 2.7%, with a 10% annualized dividend growth over the last 10 years [7] - The recent dividend increase of nearly 15% indicates confidence in the company's financial health and future prospects [7] - Current price-to-sales and price-to-earnings ratios are below their five-year averages, suggesting Hershey may also be considered a value stock [8]

Core Viewpoint - The consumer staples sector presents potential investment opportunities in Kraft Heinz (KHC) and Hershey (HSY), both of which are currently trading significantly below their three-year highs, with Kraft Heinz down 20% and Hershey down 25% [1] Dividend Comparison - Kraft Heinz offers a higher dividend yield of 4.5%, compared to Hershey's 2.7%, which is still above the S&P 500 average of 1.2% and the average yield of 2.6% for consumer staples [2] - Hershey has a consistent dividend growth streak of 15 years, while Kraft Heinz's dividend has remained flat since a cut prior to 2020, indicating Hershey's stronger dividend backing [2] Investor Sentiment on Kraft Heinz - Investors are skeptical about Kraft Heinz due to its challenging history post-merger, where cost-cutting strategies did not yield the expected growth, leading to a focus on innovation and brand building [4][5] - Kraft Heinz's key brands in North America experienced a 2.4% drop in organic sales in Q2 2024, contributing to investor caution [4] Investor Sentiment on Hershey - Hershey's recent distribution system upgrade has temporarily affected earnings due to inventory adjustments, but this issue is not expected to persist [6] - Seasonal demand fluctuations and rising cocoa prices present challenges, but Hershey has a history of managing commodity price changes effectively [7][8] Investment Recommendation - While Kraft Heinz may attract income-focused investors due to its higher yield, its underlying issues may hinder long-term growth, making Hershey a more attractive investment option despite its current challenges [9][10]

Core Insights - The article discusses the expertise of Vladimir Dimitrov, CFA, in brand and intangible assets valuation, particularly within the technology, telecom, and banking sectors [1]. Group 1: Analyst Background - Vladimir Dimitrov has a background as a strategy consultant and has worked with major global brands [1]. - His experience is primarily in the City of London, focusing on high-profile sectors [1]. Group 2: Investment Considerations - The article emphasizes the importance of conducting thorough investment research and due diligence before making investment decisions [2]. - It highlights that past performance is not indicative of future results, urging investors to consider comprehensive analysis [3].

Company Performance - Hershey's stock closed at $197.63, reflecting a decrease of -0.83% from the previous day, which is less than the S&P 500's daily loss of 0.29% [1] - Over the last month, Hershey's shares increased by 0.69%, underperforming the Consumer Staples sector's gain of 3.54% and the S&P 500's gain of 1.57% [1] - The upcoming earnings disclosure is anticipated, with expected EPS of $2.78, representing a 6.92% increase from the prior-year quarter, and projected revenue of $3.13 billion, indicating a 3.39% rise from the equivalent quarter last year [1][2] Analyst Estimates - For the entire year, the Zacks Consensus Estimates forecast earnings of $9.49 per share and revenue of $11.36 billion, showing changes of -1.04% and +1.78% respectively compared to the previous year [2] - Recent changes to analyst estimates for Hershey suggest evolving short-term business trends, with positive revisions indicating a favorable business outlook [2] Zacks Rank and Valuation - The Zacks Rank system rates Hershey at 3 (Hold), with a historical average annual return of +25% for 1 ranked stocks since 1988 [3] - Hershey has a Forward P/E ratio of 21, which is a premium compared to the industry average Forward P/E of 19.17 [3] - The company holds a PEG ratio of 5.79, while the Food - Confectionery industry has an average PEG ratio of 3.94 [3] Industry Overview - The Food - Confectionery industry is part of the Consumer Staples sector and currently holds a Zacks Industry Rank of 209, placing it in the bottom 18% of all industries [4] - The Zacks Industry Rank assesses the strength of industry groups, indicating that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [4]

Core Insights - The Hershey Company (NYSE: HSY) has experienced an almost 9% increase in its stock price since April, although it still lags behind the ~19% increase in the S&P 500 [1] Company Performance - The Hershey Company's stock price has shown a notable increase of nearly 9% year to date [1] Market Context - The performance of The Hershey Company is compared to the broader market, specifically the S&P 500, which has increased by approximately 19% [1]

Core Viewpoint - Hershey presents a buying opportunity as it is currently priced attractively despite facing short-term challenges related to cocoa prices and distribution system upgrades [1][2][8] Group 1: Valuation Metrics - Hershey's price-to-sales ratio (P/S) is approximately 3.8, below its five-year average of 4.1, indicating it is fairly priced [2] - The price-to-earnings ratio (P/E) stands at 22.5, compared to a five-year average of 25.5, further suggesting the stock is attractively priced [2] - The dividend yield is around 2.7%, higher than the five-year average of 2%, making it appealing for dividend investors [2] Group 2: Business Performance - Hershey is undergoing upgrades to its distribution system, which has temporarily affected sales, leading to a year-over-year sales decline of over 16% in the second quarter [4][5] - Approximately 9 percentage points of the sales drop are attributed to the system upgrade, while 7 percentage points are due to seasonal factors [5] - The current sales dip is viewed as a necessary adjustment in the process of long-term business improvement [4][5] Group 3: Cocoa Price Concerns - Cocoa prices are at near all-time highs, influenced by inflation, aging crops, and plant diseases, which could impact Hershey's earnings [6] - Hershey plans to implement price increases of around 6% to 7% to offset rising cocoa costs, but will do so gradually to manage margins [6] - The company's historical resilience in the chocolate market suggests that consumers are willing to accept higher prices for chocolate products [6][7]

Core Insights - Jolly Rancher has launched a new product called Jolly Rancher Ropes, which combines two iconic flavors in a chewy format, enhancing the snacking experience [1][2] - The new product is available in two flavor combinations: Green Apple + Watermelon and Blue Raspberry + Cherry, aimed at appealing to younger consumers [2] Product Details - Jolly Rancher Ropes are designed to deliver maximum fruit flavor with a unique dual-flavor pack, ensuring a rich taste experience with every chew [2] - The product is available in 6 oz and 10 oz bags at retailers nationwide and online, catering to both individual consumers and those looking to share [2] Company Overview - The Hershey Company, which owns the Jolly Rancher brand, is a leading snacks company with over 20,000 employees and more than 90 brand names, generating over $11.2 billion in annual revenues [4] - Hershey has a long-standing commitment to ethical and sustainable operations, with a focus on community support and education initiatives [4]

Core Insights - Winnebago Industries, Inc. will showcase nearly 150 new models at the Hershey RV Show, highlighting advancements in technology, design, and comfort across its premium RV brands [1][2] Group 1: Winnebago Brand Highlights - The Winnebago brand will display 101 units, including the debut of the Revel Sport camper van, which features off-road performance and off-grid capabilities [3][4] - The new View / Navion model integrates the Winnebago Connect intelligent RV platform, offering modern interiors and smart storage solutions [4] Group 2: Grand Design RV Innovations - Grand Design RV will introduce its 2025 product lineup, including the Lineage Series M, a Class C motorhome built on the Mercedes-Benz Sprinter 4500 chassis, and the expanded Transcend lineup [5][6] - The Reflection series will receive interior updates for 2025, enhancing comfort and functionality with new furnishings and modern lighting [6][7] Group 3: Newmar Luxury Offerings - Newmar will debut the Northern Star, an affordable diesel pusher, alongside 19 luxury Class A and Class Super C coaches at the Hershey Show [8][9] - The 2025 Onyx Package will be showcased, featuring a striking blackout finish for select Newmar models [9]