Core Viewpoint - The Hershey Company is currently facing significant challenges, including a sharp decline in stock price and margin pressures, but it remains a fundamentally strong business with potential for recovery and long-term investment value [2][4][14]. Financial Performance - Hershey's stock has fallen over 40% from its peak, contrasting with the broader stock market, which is at all-time highs [2]. - The company provided disappointing guidance for 2025, projecting earnings per share between $6 and $6.18, a significant drop from $9.37 in 2024 [4]. - Despite the challenges, Hershey anticipates 2% revenue growth for 2025, primarily affected by rising cocoa prices [5]. Market Challenges - The company is experiencing margin pressure due to increased commodity costs, particularly cocoa, which has seen prices surge due to adverse weather affecting crop yields in West Africa [5]. - Concerns regarding the impact of GLP-1 agonists, a class of weight loss drugs, on consumer behavior have been noted, but management has not observed any material impact on sales [6][7]. Business Strengths - Hershey is recognized as a quality business with a strong historical performance, having returned over 4,200% since 1989, despite recent stock declines [11]. - The company has maintained a high return on invested capital (ROIC) averaging over 21% over the past five years, and generates free cash flow of $0.15 to $0.20 for every revenue dollar [10]. Investment Considerations - Hershey's stock is currently viewed as the cheapest it has been in years from a dividend yield perspective, with a history of increasing dividends for 15 consecutive years [12][13]. - The potential for significant investment returns exists if Hershey can overcome its current challenges and revert to historical performance levels as cocoa prices stabilize [14].
1 Magnificent S&P 500 Dividend Stock Down 42% to Buy and Hold Forever