The Hershey Company Shows Mixed Price Movement on August 29

The Hershey Company (HSY) has a market cap of $23.8 billion. It rose by 0.71% to close at $111.67 per share on August 29, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.4%, 1.4%, and 27.4%, respectively, on the same day. HSY is trading 0.35% above its 20-day moving average, 3.5% above its 50-day moving average, and 19.4% above its 200-day moving average.

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 for having a high ROE (return on equity), stable earnings growth, and low debt-to-equity compared with peers in each sector. The YTD price movement of QUAL was 5.8% on August 29.

The Vanguard Large-Cap ETF (VV) invests 0.08% of its holdings in Hershey. The ETF tracks a market-cap-weighted index that covers 85% of the market capitalization of the US equity market.

The market caps of Hershey’ competitors are as follows:

• Mondelēz International (MDLZ) — $67.0 billion
• General Mills (GIS) — $43.1 billion

The Hershey Company continued to fall on August 29, 2016, after Mondelēz International said no to its acquisition of Hershey, which we discussed in the previous part of this series.

Hershey reported fiscal 2Q16 net sales of $1.64 billion, a rise of 3.7% over the 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, between 2Q15 and 2Q16. The company’s gross profit margin fell by 2.2%.

Its net income and EPS (earnings per share) rose to $146.0 million and $0.68, respectively, in 2Q16, compared with -$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% from 2Q15.

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

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 one 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 a barkTHINS dilution of $0.05–$0.06 per share

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.