Does Hershey Still Have Room to Run after 24% Stock Price Gain?



Impressive share price appreciation

The Hershey Company (HSY) is all set to report its fiscal 2Q16 earnings results on July 28 before the market opens. Management will hold a conference call later in the day to discuss the results. Before we dive into the estimates for 2Q16, let’s see how much the stock has gained so far in 2016.

On June 30, Mondelez International (MDLZ) made a takeover bid for Hershey for $23 billion. Later in the day, Hershey announced that its board of directors unanimously rejected Mondelez’s takeover offer and provided “no basis for further discussion.”

Article continues below advertisement

The news of the takeover offer caused Hershey’s stock to reach new highs. After the news, Hershey stock rose 21% to $117.7 in intraday trading. The stock closed at $113.49 after rising ~17% on June 30. As of July 20, Hershey stock has gained 24% so far in 2016. To know more about why Hershey rejected the offer, read No Thanks! Hershey Rejects Mondelez’s Takeover Bid.

Its stock has risen 22% since its 1Q16 release on April 26. However, after the release, the stock fell 2% despite earnings beating estimates by 3% and growing 1% year-over-year. As of July 20, Hershey outperformed the market, represented by the S&P 500 Index (SPY)by 17%.

Peer stock performance

Kraft Heinz (KHC) has returned 21%, and Kellogg (K) has returned 21% so far in 2016. Hershey is a part of the Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) and the Consumer Staples Select Sector SPDR Fund (XLP), which holds ~4% in HSY.

Article continues below advertisement

About Hershey

The Hershey is the largest producer of chocolate in North America. It’s a global leader in chocolate and non-chocolate confectionery. It operates under 80 brands in 70 countries worldwide.

What’s in the series?

Read the rest of this series to find out about analysts’ projections for revenue and earnings for Hershey in 2Q16. We’ll also discuss how Hershey increased margins in 1Q16. Later we’ll see how Hershey expects to benefit from its recent acquisition and how it has managed to remain consistent in returning value to shareholders. We’ll also discuss the company’s outlook for 2016 and Wall Street analysts’ target price and recommendations.

Let’s start with Hershey’s revenue expectations.


More From Market Realist