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What Drove Hershey’s Double-Digit EPS Growth?

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Earnings surpass estimates

In the first quarter, Hershey’s (HSY) adjusted EPS rose 12.8% YoY (year-over-year) to $1.59, beating analysts’ estimate of $1.47. Hershey’s impressive earnings growth was driven by improved organic sales, margin expansion, productivity savings, and lower tax.

Higher volumes and pricing supported Hershey’s organic sales, and in turn, its EPS. Its adjusted gross profit margin expanded 80 basis points to 45.7%, reflecting cost savings, improved volumes and pricing, and favorable commodity costs. Its adjusted operating profit margin expanded 160 basis points to 23.3%, reflecting a wider gross margin and efficiency savings, and its adjusted effective tax rate fell by 290 basis points YoY to 22.0%.

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Outlook

Hershey has reaffirmed its outlook and expects its adjusted EPS to grow 5%–7% YoY to $5.63–$5.74 this year. Improved volumes, higher price realization, and cost savings are expected to drive its gross margins and EPS, while share repurchases are expected to cushion Hershey’s bottom line. Higher packaging costs could impact its performance. In comparison, analysts expect General Mills’ (GIS) and Conagra Brands’ (CAG) bottom lines to be pressured by increased interest costs and commodity inflation.

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