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How Do Analysts Rate Hershey’s and Its Peers?

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Analyst coverage

Of the 18 analysts covering Hershey’s (HSY), one analyst has a “buy” recommendation as of December 14. The stock was rated “hold” by 83% of the analysts and “sell” by 11.0% of the analysts. The average 12-month price target for Hershey’s stock is $103.87, which reflects an upside potential of 4.0%. Hershey’s, a chocolate and snacks maker, generates 85% of its revenue from North America and the remaining 15% from international markets.

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Why a consensus “hold” rating

Hershey’s is facing subdued sales growth due to intense competition and a shift to healthier snacking habits. As discussed in part two of this series, the company is focusing on innovation to improve its top line. The company has also been taking several productivity initiatives to improve its profitability. Hershey’s constitutes 2.9% of the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS).

Comparison with peers

Out of 20 analysts covering Kellogg (K) stock, 15.0% rated it as a “buy,” 75.0% rated it as a “hold,” and 10.0% rated it as a “sell.” Analysts have set the stock’s price target at $81.59 per share with upside potential of 12.0%. Kellogg has reported mixed quarterly results for fiscal 3Q16. Its comparable (adjusted) sales fell 2.5% due to the negative effect of foreign exchange, and adjusted EPS rose 12.9% due to improvement in profit margins, reduction in tax rate, and one-time costs. For fiscal 2016, Kellogg narrowed its projection for sales and expanded it for adjusted EPS (earnings per share) due to the benefit from the lower tax rate in fiscal 3Q16.

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Of the 20 analysts covering Mondelez International (MDLZ), 14 analysts, or 70.0%, have rated the stock as a “buy” as of December 14. The stock is rated “hold” by 30.0% of analysts. Analysts have set the stock’s price target at $49.41 per share with upside potential of 15.0%. Mondelez reported a 6.6% fall in net revenue due to the deconsolidation of its Venezuela operations, unfavorable currency, and the year-over-year impact of last year’s accounting calendar change for fiscal 3Q16. Its adjusted EPS grew 36.8% due to strong operating income, strong numbers from coffee equity investments, and lower taxes.

For Campbell Soup (CPB), 6.0% of the 16 analysts covering the stock rated the stock as a “buy,” 63.0% rated it as a “hold,” and 31.0% rated it as a “sell.” Analysts have set the stock’s price target at $58.62 per share with upside potential of -1.0%. Campbell Soup reported flat growth in sales due to the positive impact of foreign exchange, partially offset by the 1% fall in organic sales, and its adjusted EPS rose 5.3% in fiscal 1Q17.

We’ll discuss Hershey’s valuation in the next part of this series.

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