Can Hershey Deliver Yet Another Positive Earnings Surprise?
What analysts expect for 1Q17
Hershey (HSY) is slated to report its 1Q17 results on Wednesday, April 26. On average, analysts expect the company to report adjusted EPS (earnings per share) of $1.25 per share in 1Q17, representing a YoY (year-over-year) growth of 13.6% when compared with 1Q16. Notably, Hershey has exceeded analysts’ earnings expectations in the past seven quarters.
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Challenging industry trend
As stated in the earlier part of this series, the food industry as a whole is witnessing sluggish demand. Slow growth in the US (SPY), geopolitical challenges in key international markets, and deflationary pressures on margins are taking a toll on the companies operating in this space. Most of the companies including Kellogg (K), Mondelēz (MDLZ), Conagra (CAG), and McCormick (MKC) have implemented stringent cost-cutting measures to drive margins, which could boost bottom-line growth.
Why Hershey is in a good position
The company remains uniquely positioned in the food space, as the snacks and confection market, in particular, is still witnessing slow but steady growth in the household and channel penetration rate. Hershey is poised to benefit from this, as the company remains the second-largest snacking manufacturer in the US, besides being the largest player in the candy, mints, and gum category. Moreover, the company’s strong portfolio of iconic brands, efficient marketing, and in-store merchandising and display are leading to an uptick in the retail takeaway and market share gains.
In addition, the company’s ability to restructure prices, supply chain productivity, and increased demand in emerging markets including Brazil and India are likely to positively impact the company’s bottom line.
However, the company isn’t immune to macroeconomic challenges, adverse currency fluctuations, competition or geopolitical risks, which will continue to impact the company’s financial results negatively.