Company Overview - Hershey Co. is positioned as a strong dividend growth stock, with a focus on domestic production to mitigate risks from international tariffs and geopolitical issues [4][5] - The company operates 14 plants in the U.S. and has additional facilities in Brazil, India, Canada, and Mexico, which provides insulation against potential retaliatory tariffs [4][5] Financial Performance - Cocoa prices, which account for approximately 20% of Hershey's cost of goods sold, have been volatile, impacting stock performance [7] - Hershey's stock is down about 1.4% this year, while the S&P 500 has gained approximately 4.4% [8] - Despite rising cocoa prices, they are forecasted to decline by 13% in 2026, which could benefit Hershey in the long term [8] Product Strategy - Hershey is adapting to changing consumer preferences by launching new products that reduce reliance on chocolate, such as the Reese peanut-butter-filled pretzels [11] - The company has made strategic acquisitions, including two plants from Weaver Popcorn Manufacturing, to diversify its product offerings and mitigate cocoa price fluctuations [11] Cost Management - Hershey is implementing a two-year restructuring plan aimed at saving $300 million through automation and streamlined production, which has positively impacted free cash flow [12] - The increase in free cash flow has enabled a 32% boost to Hershey's dividend in 2024, highlighting the company's commitment to returning value to shareholders [12][13] Dividend Outlook - Hershey's current dividend yield is 3.3%, which is more than double the S&P 500 average, with a focus on payout growth as a key investment driver [13] - The stock's price has historically tracked the dividend payout, suggesting potential for a "snap back" in stock performance as cocoa prices retreat and cost-cutting measures take effect [13][14] Market Stability - Hershey is characterized by low volatility, with a five-year beta rating of 0.28, indicating it is less volatile than the S&P 500, making it an attractive option in uncertain market conditions [14]

Core Insights - The Hershey Company is experiencing increased investor interest ahead of its Q1 2025 earnings release, despite a 14% decline in stock price over the past year [1][2][3] - Investors are potentially shifting focus from cost pressures to Hershey's strong brand portfolio and strategic evolution, which may provide defensive positioning and growth potential [2][3] Financial Performance - Hershey's management has guided for a significant drop in Adjusted EPS for fiscal year 2025, projected to decline in the mid-30% range due to rising cocoa prices [5] - Cocoa futures have recently retreated by as much as 30% from record highs, indicating a potential easing of cost pressures [6][7] Business Strategy - Hershey is diversifying its product offerings beyond confectionery, with successful salty snack brands and a pending acquisition of LesserEvil, which aligns with consumer trends towards healthier snacks [9][10] - The company is expected to achieve at least 2% net sales growth in fiscal 2025, reflecting strong brand loyalty and effective pricing strategies [8] Operational Efficiency - Hershey's "Advancing Agility & Automation Initiative" is projected to deliver approximately $125 million in savings during 2025, aiding in cost management and funding for innovation [12] - The company maintains a strong dividend yield of 3.28%, supported by a 15-year track record of annual dividend increases [11][13] Market Positioning - The stock price decline from its 2023 peak may present an entry point for investors seeking quality in a defensive sector [16] - The upcoming Q1 2025 earnings report is crucial, with investors looking for updates on volume performance, margin management, and cocoa cost outlook [15][16] Investment Consideration - Hershey offers a combination of defensive stability and growth potential, making it a compelling option for investors amid easing cost pressures and ongoing strategic initiatives [17][18]

Core Insights - The Hershey Company reported a significant decline in net sales and earnings for the first quarter of 2025, with net sales decreasing by 13.8% to $2,805.4 million compared to the same period in 2024 [6][12][41] - The company is facing challenges due to heightened cost pressures and ongoing tariff negotiations, but maintains a strong balance sheet that allows for continued investment in strategic initiatives and acquisitions [2][3] Financial Performance - Consolidated net sales for Q1 2025 were $2,805.4 million, down 13.8% from $3,252.7 million in Q1 2024 [6][41] - Reported net income was $224.2 million, or $1.10 per diluted share, representing a decrease of 71.7% compared to $797.5 million, or $3.89 per diluted share, in the prior year [6][41] - Adjusted earnings per share for Q1 2025 were $2.09, down 31.9% from $3.07 in Q1 2024 [6][41] Segment Performance - North America Confectionery segment net sales decreased by 15.0% to $2,300.1 million, with organic, constant currency net sales down 15.2% [18][41] - North America Salty Snacks segment net sales increased by 1.0% to $277.8 million, driven by a volume increase of approximately 4 points [22][41] - International segment net sales decreased by 15.9% to $227.5 million, with organic, constant currency net sales down 7.9% [25][41] Cost and Margin Analysis - Reported gross margin for Q1 2025 was 33.7%, a decrease of 1,780 basis points from 51.5% in Q1 2024, primarily due to higher commodity and manufacturing costs [13][41] - Adjusted gross margin was 41.2%, down 370 basis points from the previous year [13][41] - Selling, marketing, and administrative expenses decreased by 9.6% compared to Q1 2024, reflecting reduced advertising and lower compensation costs [14][41] Outlook and Guidance - The company expects net sales growth of at least 2% for the full year 2025, with reported earnings per share projected to decline in the high-40% range and adjusted earnings per share expected to decline in the mid-30% range [4][5] - The impact of the Sour Strips acquisition is anticipated to contribute approximately 30 basis points to net sales growth for the full year 2025 [4]