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Hershey Strong on Cost-Saving Initiatives, China Sales Down
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On Aug 18, we issued an updated research report on The Hershey Company (HSY - Free Report) , the leading chocolate manufacturer of North America.
Hershey’s second-quarter 2017 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings also increased 28.2% from the year-ago level on higher sales, solid gross margin expansion and operating income improvement in the International segment. Net sales also improved 1.5% year over year owing to strong performance by the North America segment and the acquisition of barkTHINS brand. This marks the fifth straight quarter of sales improvement after a few quarters of no growth.
Hershey’s shares have gained 4.3% so far this year compared to its industry’s 21.8% decline. This Zacks Rank #3 (Hold) company’s earnings estimates for 2017 remained stable over the last 30 days. Notably, Hershey has been able to beat earnings estimates in all of the past four quarters. The company’s productivity improvement and cost-saving initiatives should drive the stock’s performance as well.
Key Positives
Hershey regularly brings innovation to its core brands to meet consumer needs. Its initiatives have been able to drive net sales by 2.2% so far this year.
The company’s new cost savings program, Margin for Growth, bodes well. As part of the multi-year program, it will reduce its global workforce outside the U.S. by 15%. It will also improve the overall operating margin through supply chain optimization, a streamlined operating model and reduced administrative expenses, with savings likely to be recorded in 2018 and 2019.
These moves are anticipated to boost efficiency, leverage global shared services and common processes and increase capacity utilization. For 2017, Hershey expects $25 million in savings from the Margin for Growth program, more than $15 million anticipated earlier.
Concerns
The North American food industry has been witnessing sluggish growth and slowdown in consumption over the last few quarters. The industry is experiencing changes in consumer preference toward organic food items. As a result, Hershey, like a number of U.S. food producers like Mondelez International, Inc. (MDLZ - Free Report) , B&G Foods, Inc. (BGS - Free Report) and General Mills, Inc. (GIS - Free Report) , has been grappling with declining demand.
Moreover, weak consumer shopping trends and the softening chocolate category trends have been hurting Hershey’s sales in China since 2015. China’s foreign exchange-neutral sales declined 29% in the second quarter of 2017 due to continued softness in the chocolate category throughout modern trade and select SKU rationalization.
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Hershey Strong on Cost-Saving Initiatives, China Sales Down
On Aug 18, we issued an updated research report on The Hershey Company (HSY - Free Report) , the leading chocolate manufacturer of North America.
Hershey’s second-quarter 2017 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings also increased 28.2% from the year-ago level on higher sales, solid gross margin expansion and operating income improvement in the International segment. Net sales also improved 1.5% year over year owing to strong performance by the North America segment and the acquisition of barkTHINS brand. This marks the fifth straight quarter of sales improvement after a few quarters of no growth.
Hershey’s shares have gained 4.3% so far this year compared to its industry’s 21.8% decline. This Zacks Rank #3 (Hold) company’s earnings estimates for 2017 remained stable over the last 30 days. Notably, Hershey has been able to beat earnings estimates in all of the past four quarters. The company’s productivity improvement and cost-saving initiatives should drive the stock’s performance as well.
Key Positives
Hershey regularly brings innovation to its core brands to meet consumer needs. Its initiatives have been able to drive net sales by 2.2% so far this year.
The company’s new cost savings program, Margin for Growth, bodes well. As part of the multi-year program, it will reduce its global workforce outside the U.S. by 15%. It will also improve the overall operating margin through supply chain optimization, a streamlined operating model and reduced administrative expenses, with savings likely to be recorded in 2018 and 2019.
These moves are anticipated to boost efficiency, leverage global shared services and common processes and increase capacity utilization. For 2017, Hershey expects $25 million in savings from the Margin for Growth program, more than $15 million anticipated earlier.
Concerns
The North American food industry has been witnessing sluggish growth and slowdown in consumption over the last few quarters. The industry is experiencing changes in consumer preference toward organic food items. As a result, Hershey, like a number of U.S. food producers like Mondelez International, Inc. (MDLZ - Free Report) , B&G Foods, Inc. (BGS - Free Report) and General Mills, Inc. (GIS - Free Report) , has been grappling with declining demand.
Moreover, weak consumer shopping trends and the softening chocolate category trends have been hurting Hershey’s sales in China since 2015. China’s foreign exchange-neutral sales declined 29% in the second quarter of 2017 due to continued softness in the chocolate category throughout modern trade and select SKU rationalization.
4 Surprising Tech Stocks to Keep an Eye on
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector. Zacks has just released a Special Report revealing one thing tech companies literally cannot function without. More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really takes off.
See Stocks Now>>