3 Reasons to Buy Hershey Stock Like There's No Tomorrow

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]