Hershey Stock Fell despite 3Q17 Earnings Beat

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Hershey Stock Fell despite 3Q17 Earnings Beat PART 1 OF 6

Here’s Why Hershey Stock Fell despite Beating Estimates

Investors cautious on margins

Hershey (HSY) reported better-than-expected 3Q17 results on Thursday, October 26, 2017, surpassing analysts’ top-line and bottom-line estimates. However, its sluggish performance in margins didn’t sit well with investors, and the stock fell 5.3% after the earnings release. The company’s top line improved on the back of improved volumes and pricing, while favorable currency rates further supported sales growth. Cost-savings and lower input costs boosted its EPS (earnings per share) growth rate.

However, an adverse mix and elevated costs related to manufacturing and distribution took a toll on margins. The company anticipates its margins to remain pressured in the coming quarters due to higher costs, which dented investor confidence in the stock. The company’s high valuation may also keep investors on the sidelines.

Here’s Why Hershey Stock Fell despite Beating Estimates

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YTD stock performance

As the above graph shows, Hershey stock generated positive returns until Thursday, October 26, 2017. Thursday’s decline led the stock to trade in the red. On a YTD (year-to-date) basis, Hershey stock has fallen 0.50% and has lagged the benchmark index by a significant amount. The S&P 500 (SPX-INDEX) has risen 14.4% on a YTD basis as of October 24, 2017.

In comparison, the majority of packaged food manufacturing companies are also trading in the red as less demand in the United States (SPY) and a challenging retail landscape are hurting sales. Higher input costs are putting further pressure on margins.

On a YTD basis, Campbell Soup (CPB), Kraft Heinz (KHC), JM Smucker (SJM), Conagra Brands (CAG), General Mills (GIS), and Kellogg (K) have witnessed double-digit declines in their stock prices. Mondelēz (MDLZ) stock has fallen 7.7%.


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