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The Hershey Company Issues Notes, Receives Moody’s Rating

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Aug. 9 2016, Published 2:42 p.m. ET

Price movement

The Hershey Company (HSY) rose by 0.80% to close at $111.65 per share during the first week of August 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.80%, 1.5%, and 26.7%, respectively, as of August 5.

HSY is trading 1.5% above its 20-day moving average, 8.7% above its 50-day moving average, and 21.2% above its 200-day moving average.

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Related ETF and peers

The iShares MSCI USA Quality Factor ETF (QUAL) invests 0.95% of its holdings in Hershey. The ETF tracks an index of US large- and mid-cap stocks, selected and weighted by high ROE (return on equity), stable earnings growth, and low debt-to-equity relative to its peers in each sector. The YTD price movement of QUAL was 5.8% on August 5.

The market caps of Hershey’s competitors are as follows:

  • Mondelēz International (MDLZ) — $68.2 billion
  • General Mills (GIS) — $42.4 billion

Latest news on Hershey

The Hershey Company has offered $500 million worth of 2.3% notes due in 2026 and $300 million worth of 3.4% notes due in 2046 in a public offering.

The net proceeds of these offerings will be used for the following:

  • to repay Hershey’s $250 million aggregate principal amount of 5.5% notes due in 2016
  • to repay Hershey’s $250 million aggregate principal amount of 1.5% notes due in 2016
  • to fund the company’s Ripple Brand Collective acquisition and the related fees and expenses
  • for general corporate purposes
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Moody’s rated Hershey’s notes

Moody’s Investors Service has rated Hershey Company’s senior unsecured notes as “A1.” Moody’s has kept the company’s other ratings as unchanged and provided a “stable” outlook on the stock.

Performance of Hershey in 2Q16

Hershey reported fiscal 2Q16 net sales of $1.64 billion, a rise of 3.7% compared to net sales of $1.58 billion in 2Q15. Sales from its North America and International & Other segments rose by 3.2% and 7.6%, respectively, in 2Q16 compared to 2Q15. The company’s gross profit margin fell by 2.2% in 2Q16, compared to the prior year’s period.

Its net income and EPS (earnings per share) rose to $146.0 million and $0.68, respectively, in 2Q16 compared to -$99.9 million and -$0.47, respectively, in 2Q15. It reported non-GAAP (generally accepted accounting principles) EPS of $0.85 in 2Q16, a rise of 9.0% compared to 2Q15.

Hershey’s cash and cash equivalents fell by 27.8%, and its inventories rose by 16.0% in 2Q16 compared to 4Q15. Its current ratio fell to 0.68x, and its debt-to-equity ratio rose to 6.2x in 2Q16. That compares to a current ratio and debt-to-equity ratio of 0.83x and 4.1x, respectively, in 4Q15.

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Quarterly dividend

Hershey has declared quarterly dividends of ~$0.62 per share on its common stock and ~$0.56 per share on its Class B common stock. The dividends will be paid on September 15, 2016, to shareholders of record on August 25, 2016.

Projections

The company has made the following projections for 2016:

  • net sales growth of ~1.0%, including a net benefit from acquisitions and divestitures of about 0.5% and the unfavorable impact of 1 point from the foreign currency exchange rate
  • net sales growth of 2% on a constant currency basis due to macroeconomic challenges in China and low expected growth of the US CMG (candy, mint, and gum) category over the remainder of the year
  • adjusted EPS in the range of $4.24–$4.28, including barkTHINS dilution of $0.05–$0.06 per share

In the next article, we’ll take a look at Fiat Chrysler Automobiles (FCAU).

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