Higher Volumes and Margins Drive Hershey’s Q1



Key takeaways

The Hershey Company (HSY) posted stellar first-quarter earnings results on April 25. The company’s sales and earnings topped analysts’ estimates and reported healthy growth on a YoY (year-over-year) basis. Meanwhile, Hershey’s profit margins expanded, which is impressive.

Hershey’s top line benefited from improved volumes and higher pricing in the quarter. Acquisitions further supported its net sales growth rate, but adverse currency rates remained a drag. Incremental sales from acquisitions have also driven the top lines of Conagra Brands (CAG), General Mills (GIS), and the J.M. Smucker Company (SJM). However, currency volatility has negatively affected Hershey’s net sales growth.

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Both Hershey’s adjusted gross margin and operating profit margin expanded during the first quarter driven by higher volumes and pricing, cost savings, and favorable raw materials costs. Improved sales and expanded margins drove the company’s stronger-than-expected EPS. Meanwhile, a lower adjusted effective tax rate further supported the company’s first-quarter bottom line growth.

Key financial metrics

Hershey posted net sales of $2.0 billion, coming in ahead of analysts’ estimate and rising 2.3% on a YoY basis. This YoY growth reflected a 1.7% increase in volumes, a 0.2% increase in pricing, and a 0.9% benefit from acquisitions and divestitures.

Hershey’s adjusted gross margin expanded 80 basis points to 45.7% in the first quarter. Its adjusted operating margin expanded 160 basis points to 23.3%. Hershey’s adjusted effective tax rate was 22.0%, reflecting a YoY fall of 290 basis points.

Hershey posted adjusted EPS of $1.59 in the quarter, up 12.8% and handily surpassing analysts’ estimate of $1.47.


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