Company Performance - Hershey reported quarterly earnings of $2.34 per share, missing the Zacks Consensus Estimate of $2.50 per share, and down from $2.60 per share a year ago, representing an earnings surprise of -6.40% [1] - The company posted revenues of $2.99 billion for the quarter ended September 2024, missing the Zacks Consensus Estimate by 2.79%, and down from $3.03 billion year-over-year [2] - Over the last four quarters, Hershey has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Stock Performance - Hershey shares have lost about 5.2% since the beginning of the year, while the S&P 500 has gained 24.3% [3] - The current Zacks Rank for Hershey is 5 (Strong Sell), indicating expected underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the coming quarter is $2.48 on revenues of $2.9 billion, and for the current fiscal year, it is $9.39 on revenues of $11.3 billion [7] - The estimate revisions trend for Hershey is currently unfavorable, which could change following the recent earnings report [6] Industry Context - The Food - Confectionery industry, to which Hershey belongs, is currently in the bottom 6% of the Zacks industry rankings, suggesting potential challenges ahead [8]

Financial Performance - Consolidated net sales for Q3 2024 were $2,987.5 million, a decrease of 1.4% compared to the same period last year[9]. - Reported net income was $446.3 million, or $2.20 per diluted share, reflecting a decrease of 12.7%[3]. - Adjusted earnings per share-diluted were $2.34, down 10.0% year-over-year[3]. - The company reduced its full-year net sales growth outlook from approximately 2% to flat, and adjusted earnings per share growth outlook to down mid-single-digits[6]. - Total net sales for Q3 2024 were $2.9875 billion, a slight decrease from $3.0300 billion in Q3 2023[42]. - For Q3 2024, reported net income was $446.3 million, down from $518.6 million in Q3 2023, representing a decrease of 13.9%[42]. - Total segment income decreased by 15.3% to $793,006 in Q3 2024 from $936,546 in Q3 2023, with North America Confectionery segment income down 14.5% to $724,822[44]. - International segment income fell significantly by 55.2% to $14,207 in Q3 2024 compared to $31,688 in Q3 2023[44]. - Operating profit for Q3 2024 was $613,164, a decrease of 16.7% from $735,949 in Q3 2023[44]. - The company reported a 20.6% decline in income before income taxes, totaling $518,747 in Q3 2024 compared to $653,413 in Q3 2023[44]. Segment Performance - North America Confectionery segment net sales increased by 0.8% to $2,477.3 million, while North America Salty Snacks segment net sales decreased by 15.5% to $291.8 million[17][20]. - North America Confectionery net sales for Q3 2024 were $2,477,303, a 0.8% increase from $2,457,647 in Q3 2023, while Salty Snacks saw a decline of 15.5% to $291,835 from $345,182[44]. - International segment net sales decreased by 3.9% to $218.4 million, with a segment margin of 6.5%, down 740 basis points year-over-year[23][24]. Cost and Expenses - Reported gross margin was 41.3%, a decrease of 360 basis points from the prior year, driven by higher commodity costs[10]. - Selling, marketing, and administrative expenses decreased by 5.2% in Q3 2024 compared to Q3 2023[11]. - Unallocated corporate expenses decreased by 24.1% to $139.0 million, driven by lower compensation and benefit costs[25]. - Non-GAAP gross profit for Q3 2024 was $1.2048 billion, compared to $1.3615 billion in Q3 2023, reflecting a decline of 11.5%[30]. - The reported gross margin for Q3 2024 was 41.3%, down from 44.9% in Q3 2023[33]. - Non-GAAP operating profit margin decreased to 21.9% in Q3 2024 from 24.9% in Q3 2023[33]. - The company incurred $27.6 million in business realignment costs during Q3 2024, primarily related to restructuring efforts[36]. - Integration-related costs for acquisitions in Q3 2024 amounted to $22.8 million, including costs for two manufacturing plants from Weaver Popcorn Manufacturing[37]. Tax and Interest - The effective tax rate for Q3 2024 was 14.0%, a decrease of 660 basis points from the previous year[13]. - The effective tax rate for Q3 2024 was reported at 14.0%, down from 20.6% in Q3 2023[33]. - Interest expense increased by 11.5% to $44,316 in Q3 2024 from $39,755 in Q3 2023[44]. Balance Sheet - Total assets increased to $12,621,410 as of September 29, 2024, up from $11,902,941 at the end of 2023[46]. - Cash and cash equivalents rose to $614,951 in Q3 2024 from $401,902 at the end of 2023, indicating improved liquidity[46]. - Total liabilities increased to $8,416,441 as of September 29, 2024, compared to $7,803,855 at the end of 2023[46]. Future Outlook - The company expects continued challenges in supply chain efficiency and raw material costs impacting future performance[40].

Core Insights - The Hershey Company reported a consolidated net sales of $2,987.5 million for Q3 2024, reflecting a decrease of 1.4% compared to the previous year [2][8] - The company has adjusted its full-year 2024 outlook, now expecting flat net sales growth and a reported earnings per share decline of 9% to 6% [3][4] - The CEO emphasized the company's focus on driving growth in key categories despite challenges from high cocoa prices and a tough consumer environment [2] Financial Performance - Reported net income for Q3 2024 was $446.3 million, or $2.20 per diluted share, down 12.7% year-over-year [2][11] - Adjusted earnings per share for Q3 2024 were $2.34, a decrease of 10.0% compared to the same period last year [2][4] - The gross margin for Q3 2024 was reported at 41.3%, down from 44.9% in Q3 2023, primarily due to higher commodity costs [9][27] Segment Performance - North America Confectionery segment net sales increased by 0.8% to $2,477.3 million, while the North America Salty Snacks segment saw a significant decline of 15.5% to $291.8 million [14][17] - The International segment reported a net sales decrease of 3.9% to $218.4 million, with a slight organic growth of 0.2% on a constant currency basis [20][21] - Segment income for North America Confectionery fell by 14.5% to $724.8 million, while the International segment income decreased by 55.2% to $14.2 million [16][21] Cost Management - Selling, marketing, and administrative expenses decreased by 5.2% in Q3 2024, attributed to lower advertising and compensation costs [10] - Unallocated corporate expenses were reduced by 24.1% to $139.0 million, reflecting cost-saving measures [22] - The company anticipates capital expenditures of approximately $575 million to $600 million, focusing on capacity expansion and digital infrastructure investments [3][4] Tax and Interest Expenses - The reported effective tax rate for Q3 2024 was 14.0%, a decrease of 660 basis points from the previous year, driven by increased renewable energy tax credits [12][27] - Interest expense for the quarter was approximately $170 million, reflecting a higher interest rate environment [3][4]

Core Insights - The Hershey Company (HSY) is expected to report revenue growth of 1.4% year-over-year, with a consensus estimate of $3.1 billion for Q3 2024 [1] - However, the earnings consensus has decreased by 1.6% to $2.50 per share, indicating a decline of 3.9% from the previous year [1] Revenue and Earnings Expectations - The revenue estimate for Hershey reflects a modest growth trajectory despite challenges in consumer spending [1] - The earnings estimate suggests a potential decline, contrasting with the revenue growth expectations [1][3] Factors Impacting Performance - Hershey's sales have been negatively affected by a slowdown in discretionary spending, particularly in convenience stores, which traditionally contributed to strong sales [3] - The company faces pressure on its gross margin due to rising input costs, which are outpacing the benefits from price increases and productivity improvements [4] - An adjusted gross margin contraction of 230 basis points to 42.6% is anticipated for the upcoming quarter [4] Segment Performance - Despite the overall challenges, the confectionery segment is expected to show resilience, with projected sales growth of 4.6% in North America for Q3 2024 [5] - Innovations and effective pricing strategies are contributing positively to Hershey's portfolio strength [5] Earnings Prediction - Current models do not predict an earnings beat for Hershey, with a Zacks Rank of 4 (Sell) and an Earnings ESP of -1.89% [6]

Core Viewpoint - The article discusses the contrasting investment opportunities presented by Costco and Hershey, suggesting that while Costco has performed well due to crowd enthusiasm, Hershey may present a contrarian buying opportunity due to its current undervaluation and strong brand power [2][3][10]. Costco Overview - Costco has a strong reputation as a leading retail company, known for its wide selection and low prices, supported by a membership fee model that drives profits [4]. - The stock has delivered a 222% return over the past five years, significantly outperforming the S&P 500's 102% return [2]. - Costco's average price-to-earnings (P/E) ratio over the past decade is 35, indicating a premium valuation, but earnings growth is expected to slow to about 9% annually, raising concerns about sustaining such high valuations [5]. Hershey Overview - Hershey is a major player in the confectionery industry, with well-known brands and a recent expansion into snacks, maintaining a high return on invested capital (ROIC) averaging over 17% [6][7]. - The company has historically provided substantial returns, with nearly 44,000% growth over the past five decades, making it a strong long-term investment [8]. - Currently, Hershey faces challenges due to adverse conditions affecting cocoa supply, leading to increased commodity prices and negatively impacting sales [9]. Investment Considerations for Hershey - Hershey's stock is currently trading at a P/E ratio of about 20, below its historical average of 25, and its dividend yield has reached 3%, indicating potential undervaluation [10][11]. - Despite short-term challenges, Hershey is viewed as a resilient company with a strong reputation, suggesting that it may recover once cocoa prices stabilize [11]. - Long-term investors may find Hershey to be a more attractive option compared to Costco, which may not sustain its current valuation levels [12].

Group 1 - The focus is on long-term growth and dividend growth investing, emphasizing the importance of profitability over low valuation [1] - Key metrics for evaluating stocks include margins, free cash flow stability and growth, and returns on invested capital [1] - The approach involves researching high-quality companies and continuously seeking to deepen understanding of them [1]

Core Insights - The article discusses Hershey's (HSY) business strategy, management quality, and financial health, highlighting its over 3% dividend yield as a potential indicator of future performance [1] Business Strategy - Hershey's business strategy is analyzed, focusing on how it positions itself in the market and its approach to growth [1] Management Quality - The quality of management at Hershey is evaluated, emphasizing leadership effectiveness and decision-making processes [1] Financial Health - Financial health metrics are reviewed, including profitability, revenue growth, and overall financial stability, which are crucial for assessing investment potential [1]

Group 1 - The article assesses two major snack companies, Hershey and Mondelez International, in the context of the upcoming Halloween season, highlighting their iconic brands like Reese's and Kit Kat [1] - The analysis is informed by Joseph Jones, a professor with over fifteen years of market study experience, focusing on dividend growth investment strategies [1] Group 2 - The article does not provide specific financial data or performance metrics for Hershey or Mondelez International [2]

Group 1: Hershey Company - The Hershey Company operates in recession-resistant industries, showcasing stability with a five-year beta of 0.37, indicating lower volatility compared to the broader market [2] - The company's current drawdown of 33% from its all-time high is its third-largest in three decades, following significant drops during past market crashes [2] - Despite recent challenges, Hershey's enterprise value to EBITDA ratio has improved from an all-time high of 24 to 15, indicating a more reasonable valuation [3] - Hershey is facing short-term headwinds, including a new enterprise resource planning system and fluctuating cocoa prices, but its market-leading brands are expected to endure [4] - The company has increased its dividend payments by 32% over the past three quarters, with the current payout using only 55% of net income, allowing for future increases [5] - Hershey's leadership position and recent acquisitions, such as Skinny Pop Popcorn and Dot's Homestyle Pretzels, have contributed to sales growth of 13% and 65% annually since 2019 [4][6] Group 2: MTY Food Group - MTY Food Group's stability is attributed to its diversified portfolio of approximately 90 quick-service food brands, catering to various cuisines and seasonal demands [7] - The company's asset-light model, primarily through franchising, allows for stable free cash flow margins, maintaining a 20% margin during the pandemic [8] - MTY has made 27 acquisitions worth over $1.7 billion in the last decade, effectively redeploying free cash flow into new ventures [9] - The current dividend yield of 2.3% is at a decade-high outside of the 2020 crash, utilizing only 14% of free cash flow, indicating potential for significant future increases [9] - MTY's shares are trading at an EV/FCF ratio of 10, prompting management to buy back shares at discounted prices, with a 39% drop from all-time highs [9][10] - The company has reduced its share count by 1.2% annually since 2019, enhancing cash returns to shareholders through dividends [10]

Core Insights - Hershey has announced a five-year agreement with nine cocoa-producing cooperatives in Côte d'Ivoire as part of its "Cocoa For Good" strategy, which involves a total investment of $500 million over ten years to improve the well-being of cocoa farming communities [1][4]. Group 1: Agreement Details - The agreement includes a memorandum of understanding between Hershey, Sucden, and the nine cooperatives, focusing on professionalizing cocoa farming, improving profitability, investing in community resources, and preserving the environment [2][4]. - This initiative aims to build lasting relationships with farmers, providing stability and enabling direct engagement in addressing on-farm challenges [2][3]. Group 2: Investment and Programs - In addition to the $500 million investment, Hershey launched a $40 million Income Accelerator program in 2023 and is funding the construction of primary schools in farming communities [4]. - The agreement aligns with Côte d'Ivoire's National Strategy for Sustainable Cocoa, ensuring a coordinated approach to address key challenges in the cocoa sector [4]. Group 3: Company Commitment - Hershey emphasizes the importance of collaboration across public and private sectors to improve farmer incomes, highlighting that trust is built through strong, long-lasting relationships [3]. - The company has a long-standing commitment to ethical operations and community support, dating back over 130 years [6].