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Three Food Stocks That Are Defying Industry Woes

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Part 6
Three Food Stocks That Are Defying Industry Woes PART 6 OF 9

Why Hershey’s Earnings Per Share Are Expected to Grow

Higher margins to drive EPS growth

Hershey (HSY) has been generating strong margins, which has been supporting its EPS (earnings per share) growth. Healthy sales, productivity, cost-saving measures, and lower input costs have all helped the company expand its margins, which are likely to grow and supplement its bottom-line performance going forward.

The company’s management projects that its margins will improve on a YoY (year-over-year) basis, mainly driven by an anticipated decline in input costs, higher savings from costs, and supply-chain reinvention.

Why Hershey’s Earnings Per Share Are Expected to Grow

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Notably, peers Mondelēz International (MDLZ), Kellogg (K), Conagra (CAG), Kraft Heinz (KHC), and General Mills (GIS) are also focusing on trimming costs to drive bottom-line growth.

Outlook

Hershey projects that its 2017 EPS will benefit from higher productivity and cost savings. Meanwhile, the company anticipates a lower effective tax rate and a decline in input costs to support its bottom-line growth. The company expects its EPS to come in at the high end of its guided range of $4.72–$4.81, representing a growth of 7%–9% YoY.

However, HSY’s EPS could take a hit from increased advertising and marketing spending and a flat sales outlook for its North America segment. An adverse product mix could also dent its profitability.

By comparison, rival Mondelēz projects double-digit growth in its bottom-line on a currency-neutral basis for 2017. The company expects its EPS to benefit from its planned product pipeline for 2H17 and stringent cost-control measures.

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