Core Viewpoint - The Hershey Company has faced volatility in its stock performance, currently down over 25% from its record high in early 2023, but there are reasons for a bullish long-term outlook despite recent disappointing results [1]. Group 1: Company Overview - Hershey is a globally recognized leader in chocolate with a history of over 125 years, also owning iconic brands like Reese's, KitKat, Jolly Rancher, and Twizzlers [2]. - The company has expanded into salty snacks with products like SkinnyPop Popcorn and Dot's Pretzels, which are important growth drivers [2]. Group 2: Recent Performance - In Q2 2024, Hershey experienced a 16.7% drop in sales and a 38% decline in earnings per share (EPS) to $1.27 compared to Q2 2023 [3]. - The decline was largely attributed to the implementation of a new enterprise software system and planned inventory adjustments, while the North American salty snacks group saw a 9% volume increase [3][4]. - Hershey is guiding for 2024 net sales growth of around 2% and expects EPS to be "down slightly" from $9.59 in 2023 [4]. Group 3: Future Outlook - The company has various strategies to adapt to market changes, including resource allocation and pricing management, with optimism for international market expansion [5]. - Hershey has a strong history of dividend growth, having increased its quarterly dividend rate every year since 1988, with a recent 15% increase to $1.37 per share, yielding 2.7% [5]. - The stock is currently trading at a forward price-to-earnings ratio of 21, which is below its five-year average of 26, indicating potential undervaluation [6]. Group 4: Long-term Projections - Management targets adjusted annual EPS growth of 6% to 8% over the long term, with predictions that the stock price could reach $300 by 2029, representing approximately 50% upside from current levels [7][8].

Group 1 - Hershey is a well-established consumer-staples company known for its profitability and consistent dividend payments, but there are concerns about the sustainability of its yield hikes [1][2] - The current quarterly dividend is $1.37 per share, translating to an annualized amount of $5.48, contingent on the company maintaining this payout level [2] - Hershey reported a Q2 earnings-per-share (EPS) of $1.27, missing expectations of $1.44, with a significant year-over-year earnings decline of 36.8% attributed to reduced consumer discretionary spending [2][3] Group 2 - Hershey's forward annual dividend yield stands at 2.68%, which is higher than the consumer-defensive sector average of 2.13% [3] - The company's dividend payout ratio is 59%, calculated from $5.30 in dividends against $8.96 in earnings per share, which is slightly above the 50% threshold that may indicate caution [3] - The decline in earnings is a critical factor to monitor, suggesting that investors should be cautious about chasing yield with Hershey or similar stocks [3]

Core Viewpoint - The Hershey Company is facing challenges due to rising cocoa prices and reduced consumer spending, leading to a decline in revenue and net income, but its low P/E ratio and strong dividend yield may present a buying opportunity for income-focused investors [1][2][3][4][6]. Company Performance - Hershey's revenue for the first half of 2024 was $5.3 billion, a decrease of 3% year-over-year, with a significant 17% drop in sales during the second quarter [2]. - The net income for the first two quarters of 2024 was $978 million, down 2% from the previous year [2]. - The company forecasts a 2% yearly reduction in net sales growth and a decline of 1% to 3% in earnings-per-share growth for 2024 [3]. Valuation Metrics - Hershey's stock is currently trading at a P/E ratio of 22, which is below the five-year average of 26, indicating potential for price appreciation as business conditions improve [4]. - The stock has only decreased by 7% over the past year, despite underperforming the S&P 500 over the last five years [3][4]. Dividend Analysis - Hershey has a consistent dividend payout of $5.48 per share annually, resulting in a dividend yield of nearly 2.8%, which is more than double the S&P 500 average of 1.3% [4]. - The company's free cash flow was approximately $551 million, covering the $544 million in dividend costs, while in 2023, free cash flow of around $1.55 billion covered $889 million in dividend costs, indicating sustainability of the dividend [5]. Investment Considerations - The recent slowdown in performance is likely temporary, and the lower P/E ratio may represent a buying opportunity for income-focused investors [6][7]. - Hershey operates in a competitive chocolate industry, relying heavily on its brand strength to maintain and grow sales, with limited expansion opportunities [7].

Core Insights - The Hershey Company has appointed Michael Del Pozzo as President of U.S. Confection, effective September 16, 2024, to lead the company's growth in the U.S. market [1][2] - Del Pozzo has extensive experience from his 23 years at PepsiCo, where he managed a $10 billion business and transformed Gatorade into a portfolio of sports and fitness brands [1][2] - He will work closely with other business unit leaders to advance Hershey's strategic goals and consumer needs [2] Company Overview - The Hershey Company is a leading snacks company with over 20,000 employees globally and more than 90 brand names, generating over $11.2 billion in annual revenues [3] - Iconic brands include Hershey's, Reese's, Kisses, Kit Kat®, Jolly Rancher, Twizzlers, and salty snacks like SkinnyPop and Pirate's Booty [3] - Hershey has a long-standing commitment to ethical and sustainable operations, with a focus on education and community support since its founding [3]

Core Viewpoint - The U.S. sugar consumption is high, leading to significant profits for companies producing sugary products, making sugar stocks attractive for passive income generation [1][7] Group 1: Coca-Cola - Coca-Cola has a strong dividend history, marking its 62nd consecutive annual dividend increase with a 5.4% raise, maintaining its status as a Dividend King [2][3] - The company paid $8 billion in dividends last year, totaling $84.7 billion since January 2010, with a current dividend yield of approximately 2.7%, more than double the S&P 500's yield [2] - Coca-Cola aims for 4% to 6% annual revenue growth and 7% to 9% earnings-per-share growth, supported by robust free cash flow of $9.2 billion expected in 2024 [3] Group 2: Hershey - Hershey has a solid dividend track record, increasing its payout for 15 consecutive years, including a 15% raise this year, with a current yield of 2.8% [4] - The company generated over $5 billion in sales in the first half of the year, with nearly $1 billion in income, driven by popular brands like Reese's and KitKat [4] - Hershey targets 2% to 4% annual net sales growth and 6% to 8% adjusted earnings-per-share growth, planning to align dividend increases with earnings growth [4] Group 3: Mondelez - Mondelez has increased dividends for 12 years, with an 11% raise in June and consistent double-digit growth in dividend-per-share over the last five years, currently yielding around 2.6% [5] - The company caters to a large snacking market, with 88% of consumers snacking daily, and owns popular brands like Oreo and Cadbury [5] - Mondelez aims for 3% to 5% annual revenue growth, targeting high single-digit earnings-per-share growth and over $3 billion in annual free cash flow for acquisitions and dividends [6]

Group 1 - Citigroup downgraded Hershey Co (NYSE:HSY) from "neutral" to "sell" and reduced the price target from $195 to $182, citing cocoa inflation and volume challenges as potential negative impacts on earnings [1] - Hershey's stock was trading at $194.80, down 0.8%, and has experienced a 10.8% year-over-year deficit [1] - The stock's 50-day call/put volume ratio is 3.01, indicating that bullish bets are significantly more popular than usual, higher than 90% of readings from the past year [1] Group 2 - The current premium for Hershey stock is considered affordably priced, with a Schaeffer's Volatility Index (SVI) of 19%, which is in the low 24th percentile of annual readings [2]

Core Viewpoint - The Hershey Company has been downgraded from a bullish to a neutral rating due to declining net sales and a muted outlook for 2024, raising concerns about potential overvaluation [1][2]. Financial Information - For Q2 2024, Hershey reported revenue of $2.07 billion, which was $246.38 million below analyst expectations and represented a 16.7% decline year-over-year [4][6]. - Earnings per share (EPS) were $1.27, missing forecasts by $0.18 [4]. - The North America Confectionery segment, the largest for Hershey, experienced a significant decline in sales, contributing to the overall revenue drop [7][8]. Profitability - The gross margin decreased by 530 basis points, attributed to derivative mark-to-market losses, higher commodity costs, and fixed cost deleverage [13]. - Operating profit fell nearly 49% compared to the previous year, with the operating margin shrinking by 860 basis points [13]. Macroeconomic Environment - Poor consumer confidence and reduced discretionary spending have been identified as primary factors affecting Hershey's performance [9][10]. - Consumer sentiment in the U.S. has stagnated and trended downward, suggesting that demand for Hershey's products may not improve significantly in the near future [10]. Balance Sheet Insights - Accounts receivable have increased year-over-year, while sales have declined, indicating potential issues with credit sales and demand forecasting [12]. - Inventory levels are rising despite falling sales, which may lead to increased discounting and negatively impact profitability [12]. Valuation - Hershey's stock is trading at a significant premium compared to the consumer staples sector median, with a P/E Non-GAAP (TTM) of 21.95 versus the sector median of 18.35 [17]. - Despite the premium valuation, Hershey's multiples indicate it is selling at a discount compared to its historical valuation [18]. Dividend and Shareholder Returns - Hershey has a strong history of dividend payments, having paid dividends for over 34 years and committed to growing them for more than a decade [22][23].

Core Viewpoint - The Hershey Company is experiencing a challenging year with a significant stock pullback, but management's communication has helped stabilize investor sentiment despite a disappointing Q2 earnings report [1][2][10]. Financial Performance - In Q2 2024, Hershey reported net sales of approximately $2.07 billion, a 16.7% year-over-year decrease, with net income down 55.1% to $180.9 million or $0.89 per share [8][14]. - North America Confectionery sales fell by 20.7% to $1.58 billion, while North America Salty Snacks increased by 6.4% to $290 million, and International sales decreased by 8.9% to $205 million [8][14]. - The gross margin for Q2 was reported at 40.2%, down from 45.5% a year ago, indicating pressure on profitability [8][14]. Growth Outlook - Hershey's long-term outlook anticipates net sales growth of 2% to 4% and EPS growth between 6% to 8%, reflecting a stable but slow growth trajectory [5][12]. - The company has been focusing on its Salty Snacks division, which has shown significant growth, with SkinnyPop and Dot's Pretzels contributing over $860 million in retail sales [5][7]. Market Dynamics - Cocoa prices have been a significant factor affecting Hershey's stock performance, with recent declines in cocoa prices positively impacting investor sentiment despite the Q2 earnings miss [2][10]. - The company is sensitive to seasonal sales patterns, particularly around major holidays, which affected Q2 results due to the timing of Easter [10][11]. Shareholder Returns - Hershey increased its dividend by 15% at the end of Q1, maintaining a payout ratio below 50%, signaling confidence in future cash flow generation [2][11]. - The company has a TTM free cash flow of approximately $1.4 billion and has returned over $1 billion through dividends and share buybacks, indicating a commitment to returning value to shareholders [11][12]. Valuation Considerations - Hershey's stock is currently viewed as having a steep valuation with a PE ratio above 20, despite slow growth and existing headwinds [12][13]. - The company's ability to generate steady cash flows and its FCF yield of 4.7% provide some justification for its valuation, attracting long-term investors [12].

Core Viewpoint - The Hershey Company is experiencing significant financial weakness in Q2 2023, with a notable decline in revenue and operating income, despite its historically resilient performance and strong brand positioning in the industry [1][4][15] Financial Performance - Hershey's Q2 2023 report indicated a -16.7% revenue decline and a -48.7% decrease in operating income, marking the largest quarterly decline in at least a decade [4] - The company lowered its 2024 sales growth guidance from 2-3% to approximately 2% and adjusted earnings per share expectations to "down slightly" from a previously flat outlook [4] Historical Growth - From 2003 to 2023, Hershey has achieved a revenue CAGR of 5.0%, with stable operating margins reaching 22.7% in 2023, indicating strong long-term financial health [3] - The stock has appreciated at a CAGR of 7.8% over the past decade, with a current dividend yield of 2.79% [1] Headwinds - Key factors contributing to the Q2 decline include: - ERP implementation causing manufacturing and delivery disruptions, estimated to have contributed around 9 percentage points to the revenue decline [5] - Retailer inventory management issues, which had an estimated 7 percentage point adverse effect on sales [5] - Slowing food inflation, which decreased from a 6.4% CAGR from 2021 to 2023 to just 1.1% in July 2023, potentially impacting both revenue growth and margins [6] - Elevated cocoa prices due to poor weather conditions in West Africa, leading to a significant drop in gross margin to 40.2%, down 5.3 percentage points year-on-year [8] - Lower discretionary spending, although its impact on Q2 performance is considered less significant due to the defensive nature of the industry [9][10] Future Outlook - Despite current challenges, Hershey is expected to navigate through headwinds effectively due to its high margin levels and strong brand portfolio [11] - The company is projected to stabilize growth at a lower level than in previous years, with a revenue CAGR of 2.6% from 2023 to 2033 [12] - The fair value estimate for Hershey's stock is $232.19, indicating a 20% upside from the current stock price, suggesting potential undervaluation [13] Valuation - Hershey's valuation is comparable to industry peers, with a forward EV/EBITDA of 14.8, indicating a fair valuation amidst current headwinds [13]

Core Viewpoint - Hershey is facing challenges due to high cocoa prices but remains a profitable company with a strong dividend yield, making it an attractive investment opportunity. Group 1: Financial Performance - Hershey has increased its quarterly dividend by 77% over the last five years and currently offers a forward dividend yield of 2.75%, the highest in five years [1][4][5] - The company reported a net profit of $1.8 billion on $11 billion of revenue over the last four quarters, translating to adjusted earnings per share of $8.96 [4][5] - Despite a year-over-year sales decrease of 16% in the second quarter, the base business saw a low-single-digit decline in sales, with international sales up mid-single digits [2] Group 2: Market Outlook - The confectionery market is estimated to be worth $133 billion and is expected to grow at a compound annual rate of nearly 5% through 2029, providing a favorable environment for Hershey [3] - Hershey's management expects full-year sales to increase approximately 2%, with new product launches for Halloween and the holiday season anticipated to boost sales [2] Group 3: Strategic Positioning - Hershey owns several top brands, including Cadbury, Reese's, Twizzlers, KitKat, and Jolly Rancher, which helps in building relationships with retailers and driving higher sales [3] - The company sees underdeveloped sales channels like e-commerce as an opportunity for growth [2]