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Why Analysts Expect Hershey Stock to Fall

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Target price indicates a fall

Wall Street maintains a consensus target price of $122.93 per share on the Hershey Company (HSY), which implies a potential downside of 10.9% based on its closing price of $137.90 on June 19. Analysts’ consensus estimate indicates that Hershey’s revenue and earnings are expected to continue to improve on a YoY (year-over-year) basis. However, the rate of increase is likely to stay low.

The chocolate maker’s revenues are expected to remain pressured in the second quarter of 2019, reflecting a timing shift in the Easter holiday. Moreover, analysts expect Hershey’s top line to increase in the low single digits in the second half.

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Hershey’s bottom line is expected to gain from favorable input cost trends and higher pricing. Moreover, a lower effective tax rate and share buybacks are expected to cushion its earnings. However, analysts expect Hershey’s adjusted EPS to mark mid-single-digit growth in 2019 and 2020, which makes its current valuation unattractive and could limit the upside in its stock.

Rating summary

Ten of the 13 analysts covering Hershey have given it “hold” ratings, three have given it “buy” ratings, and three have given it “sells.”

In comparison, Wall Street analysts have a consensus “buy” recommendation on Mondelēz (MDLZ) and Conagra Brands (CAG) stocks. Meanwhile, analysts have neutral views on General Mills (GIS), the Kellogg Company (K), and the J.M. Smucker Company (SJM) stocks.

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