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Why Hershey Stock Fell despite Strong 2Q17 Results

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Dec. 4 2020, Updated 10:51 a.m. ET

What took a toll on Hershey stock

The Hershey Company (HSY) posted better-than-expected 2Q17 results, which it released on June 26, 2017. The company’s sales and EPS (earnings per share) beat Wall Street’s expectations. Moreover, Hershey generated significant margin growth and witnessed healthy performance in North America amid several challenges. 

The iconic candy manufacturer increased its quarterly dividends by 6%. However, all these factors failed to lift investors’ sentiment in the stock. The company’s stock fell 1.3% before closing at $106.00, following the company’s tepid second half outlook.

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Hershey’s management expects its 2H17 sales to remain flat as an earlier-than-expected shipment in 2Q17 and a continued slowdown in the food industry could affect its sales growth. However, improved performance from new product launches, higher net price realization, increased marketing, and in-store activities are likely to help its sales growth.

The company stood by its earlier guidance on margins and EPS despite stronger-than-expected margin growth in 2Q17. Its management expects its 2H17 margins to benefit from lower input costs and stringent cost control measures. 

However, an unfavorable product mix and anticipated lower sales are likely to remain a drag on its numbers. Plus, the company’s planned increase in advertising costs could affect its operating margins.

YTD price performance

On July 26, 2017, Hershey stock was up ~2.5% on a YTD (year-to-date) basis. This means that the company has underperformed the S&P 500 Index (SPX-INDEX) and the Consumer Staples Select Sector SPDR ETF (XLP), which rose 10.7% and 6.9%, respectively, during the same period.

However, the company outperformed most of its peers in terms of stock price appreciation. Among the company’s peers, Mondelēz (MDLZ), Kellogg (K), Campbell Soup (CPB), General Mills (GIS), and ConAgra Brands (CAG) saw their stock prices trading in the red on a YTD basis.

Series overview

Hershey (HSY) reported its 2Q17 results on July 26, 2017. In this series, we’ll analyze Hershey’s 2Q17 performance with respect to sales, margins, and EPS. We’ll also look at the latest analyst recommendations for Hershey stock.

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