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Hershey Hits the Sweet Spot for Defensive Investors
MarketBeat· 2025-05-01 10:45
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]
Hershey Reports First-Quarter 2025 Financial Results
Prnewswire· 2025-05-01 10:45
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]