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Hershey Stock Gains on First-Quarter Beat

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Where Hershey stock could be headed

The Hershey Company (HSY) stock was up more than 3% in the premarket trading session following the company’s stronger-than-expected first-quarter earnings results. We expect Hershey’s solid first-quarter performance—especially on the margins and earnings fronts—to support its stock in the near term.

However, the upside to Hershey stock could be limited, as it’s already up 9.2% this year as of April 24, and it’s trading at 20.8x its 2019 estimated EPS of $5.64, which looks unattractive given its projected growth rate of 5.2%.

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Most of the analysts covering Hershey stock continue to recommend “holds.” Besides Hershey, analysts have suggested “holds” on the shares of General Mills (GIS), the J.M. Smucker Company (SJM), and the Kellogg Company (K).

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Guidance

Hershey’s management has reaffirmed its guidance and expects the company’s net sales to register 1%–3% growth in 2019. Improved organic volumes and pricing and benefits from acquisitions and divestitures are expected to drive its top line.

Hershey’s adjusted EPS are expected to be in the range of $5.63–$5.74, up 5%–7% on a year-over-year basis. Improved volumes and margin expansion are expected to support Hershey’s bottom line growth in 2019.

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