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Hershey (HSY) Keen on Acquisition & Innovation: Stock to Gain?
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The Hershey Company (HSY - Free Report) has been actively pursuing acquisitions to bolster its product portfolio and increase its revenues. This strategic approach was highlighted in April 2023 when HSY revealed its purchase of two manufacturing facilities from Weaver Popcorn Manufacturing.
This move aligns with Hershey's ongoing commitment to expanding its presence in the popcorn production and co-packing industry. This not only supports continued growth of the SkinnyPop brand through an expanded supply chain but also solidifies HSY's position in the thriving popcorn market.
In addition to its acquisition strategy, the company has been focusing on enhancing its production capabilities. A significant step in this direction is the construction of a chocolate manufacturing facility in Hershey, PA. This facility is projected to increase its production capacity by 5% in 2023, demonstrating Hershey's dedication to optimizing its operations for improved output, profitability, utilization rates and service levels.
HSY has been dedicated to addressing the changing preferences and needs of consumers, both domestically and internationally. Hershey Canada, its wholly owned subsidiary, recently introduced HERSHEY'S OAT MADE, its first plant-based chocolate product. The rising demand for plant-based food options, including plant-based protein and now plant-based chocolate, is driven by consumers' growing focus on health and wellness.
Image Source: Zacks Investment Research
Pricing Strategy & Brand Portfolio Bode Well
Hershey has effectively employed a pricing strategy to counteract the impacts of inflation, resulting in a significant contribution of 7.7% to growth of organic net sales in the second quarter. This pricing approach had a notably positive influence, particularly in the North America Confectionery and Salty Snacks segments.
The strength of HSY lies in its robust brand portfolio, which includes renowned names like Hershey's, Reese's, Hershey's Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers. These core brands continued to demonstrate their resilience in the second quarter of 2023 and performed exceptionally well. This success can be attributed to substantial investments in advertising, in-store merchandising, programming and innovation.
Hershey is anticipating a strong Halloween season this year, recognizing that consumers are planning elaborate displays. The company is well-positioned to leverage this opportunity through effective marketing strategies.
Cost Hurdles
HSY has been contending with elevated selling, marketing and administrative costs over an extended period. In the second quarter of 2023, the company saw a 5.2% year-over-year increase in its selling, marketing and administrative expenses due to heightened levels of investments in media and capabilities. Expenses related to advertising and consumer marketing rose 14.9% year over year primarily due to increased investments across various segments.
Wrapping Up
Efficient pricing and brand strength place Hershey well despite cost hurdles. Management envisions year-over-year net sales growth of 8% for 2023. Adjusted EPS is envisioned to increase 11-12% to $9.46-$9.54 in 2023. Earlier, the company expected adjusted EPS growth of 11%.
Shares of this Zacks Rank #3 (Hold) company have lost 14.7% over the past year compared with the industry’s decline of 10.8%.
Bet Your Bucks on These Hot Stocks
We have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. (LW - Free Report) , Post Holdings, Inc. (POST - Free Report) and The Kraft Heinz Company (KHC - Free Report) .
Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported figures. LW has a trailing four-quarter earnings surprise of 46.2%, on average.
Post Holdings is a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. The company currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and EPS suggests growth of 13.2% and 189.3%, respectively, from the year-ago reported figures. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
Kraft Heinz is one of the largest consumer packaged food and beverage companies in North America. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and EPS suggests growth of 2.2% and 4%, respectively, from the year-ago reported figures. KHC has a trailing four-quarter earnings surprise of 11.3%, on average.
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Hershey (HSY) Keen on Acquisition & Innovation: Stock to Gain?
The Hershey Company (HSY - Free Report) has been actively pursuing acquisitions to bolster its product portfolio and increase its revenues. This strategic approach was highlighted in April 2023 when HSY revealed its purchase of two manufacturing facilities from Weaver Popcorn Manufacturing.
This move aligns with Hershey's ongoing commitment to expanding its presence in the popcorn production and co-packing industry. This not only supports continued growth of the SkinnyPop brand through an expanded supply chain but also solidifies HSY's position in the thriving popcorn market.
In addition to its acquisition strategy, the company has been focusing on enhancing its production capabilities. A significant step in this direction is the construction of a chocolate manufacturing facility in Hershey, PA. This facility is projected to increase its production capacity by 5% in 2023, demonstrating Hershey's dedication to optimizing its operations for improved output, profitability, utilization rates and service levels.
HSY has been dedicated to addressing the changing preferences and needs of consumers, both domestically and internationally. Hershey Canada, its wholly owned subsidiary, recently introduced HERSHEY'S OAT MADE, its first plant-based chocolate product. The rising demand for plant-based food options, including plant-based protein and now plant-based chocolate, is driven by consumers' growing focus on health and wellness.
Image Source: Zacks Investment Research
Pricing Strategy & Brand Portfolio Bode Well
Hershey has effectively employed a pricing strategy to counteract the impacts of inflation, resulting in a significant contribution of 7.7% to growth of organic net sales in the second quarter. This pricing approach had a notably positive influence, particularly in the North America Confectionery and Salty Snacks segments.
The strength of HSY lies in its robust brand portfolio, which includes renowned names like Hershey's, Reese's, Hershey's Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers. These core brands continued to demonstrate their resilience in the second quarter of 2023 and performed exceptionally well. This success can be attributed to substantial investments in advertising, in-store merchandising, programming and innovation.
Hershey is anticipating a strong Halloween season this year, recognizing that consumers are planning elaborate displays. The company is well-positioned to leverage this opportunity through effective marketing strategies.
Cost Hurdles
HSY has been contending with elevated selling, marketing and administrative costs over an extended period. In the second quarter of 2023, the company saw a 5.2% year-over-year increase in its selling, marketing and administrative expenses due to heightened levels of investments in media and capabilities. Expenses related to advertising and consumer marketing rose 14.9% year over year primarily due to increased investments across various segments.
Wrapping Up
Efficient pricing and brand strength place Hershey well despite cost hurdles. Management envisions year-over-year net sales growth of 8% for 2023. Adjusted EPS is envisioned to increase 11-12% to $9.46-$9.54 in 2023. Earlier, the company expected adjusted EPS growth of 11%.
Shares of this Zacks Rank #3 (Hold) company have lost 14.7% over the past year compared with the industry’s decline of 10.8%.
Bet Your Bucks on These Hot Stocks
We have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. (LW - Free Report) , Post Holdings, Inc. (POST - Free Report) and The Kraft Heinz Company (KHC - Free Report) .
Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported figures. LW has a trailing four-quarter earnings surprise of 46.2%, on average.
Post Holdings is a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. The company currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and EPS suggests growth of 13.2% and 189.3%, respectively, from the year-ago reported figures. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
Kraft Heinz is one of the largest consumer packaged food and beverage companies in North America. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and EPS suggests growth of 2.2% and 4%, respectively, from the year-ago reported figures. KHC has a trailing four-quarter earnings surprise of 11.3%, on average.