The Hershey Company (HSY - Free Report) reported robust third-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. Results gained from solid performance in the North America segment. Notably, the company gained confectionary market share of nearly 190 basis points (bps) in the United States.
Earnings & Revenue Discussion
Adjusted earnings per share (EPS) of $1.86 came ahead of the Zacks Consensus Estimate of $1.71, while it increased 15.5% year over year.
Consolidated net sales of $2,219.8 million increased 4% year over year and surpassed the Zacks Consensus Estimate of $2,154.9 million. Price realization and volume growth were 2.9 point and 0.9 point, respectively, thanks to strength in the North America segment. Moreover, the net impact of acquisitions and divestitures was positive to the tune of 0.8 point stemming from benefits of ONE Brands buyout. However, unfavorable foreign currency rates affected sales by 0.6 point. Further, organic sales on a constant-currency (cc) basis increased 3.8%.
Margins in Detail
Adjusted gross margin expanded 60 bps to 45.4% on the back of favorable pricing, which was somewhat offset by unfavorable commodities and escalated warehouse costs.
Selling, marketing and administrative costs dropped 2.6%. Advertising and related consumer marketing expenses fell 4.6%. Selling, marketing and administrative costs excluding advertising and related consumer marketing decreased 1.5%. Pandemic-related travel and meeting cost savings and the timing of investments in key strategic initiatives were a reason.
Adjusted operating profit amounted to $543.3 million, up 13.9% from the prior-year quarter’s figure. Adjusted operating profit margin expanded 220 bps to 24.5% led by solid price realization in the North America segment as well as corporate and operational cost management.
Segmental Update
North America (the United States and Canada) net sales increased 6.3% year over year to $2,014.2 million. Markedly, price realization and net impact of acquisitions and divestitures boosted the unit’s sales by 3.3 points and 0.9 points, respectively. Volumes contributed 2.2 points driven by retailer inventory replenishment and strong consumer takeaway in everyday chocolate and baking products. However, currency translations dented the unit by 0.1 point.
Net sales in the International and Other segment fell 14.4% to $205.7 million. On a cc basis, net sales declined 9.3%. Volumes hit sales by 9.6 points, mainly due to lower sales in the company's owned retail locations. Although retail locations reopened during the quarter, footfall was low stemming from reduced consumer travel and capacity restrictions imposed by government. Also, reduced air travel was a reason. Combined net sales in Mexico, Brazil, China and India, dropped 13.9%. Excluding currency headwinds, combined organic sales from these markets decreased 2.3% at cc. Nevertheless, favorable net price realization of 0.3 points offered some respite.
Financials
Hershey ended the quarter with cash and cash equivalents of $1,205.9 million, long-term debt of $4,093.2 million and total shareholders’ equity of $2,068.8 million.
In a separate press release, the company declared a quarterly dividend of 80.4 cents per share for its common stock and 73.1 cents for Class B common stock. These are payable on Dec 15 to shareholders of record as of Nov 20. Notably, this marks the company’s 364th and 145th straight dividend payout on its common stock and Class B common stock, respectively.
Outlook
Hershey expects net sales to rise nearly 1% for 2020 reflecting a 2 point pandemic-related headwind in International & Other segment. Net impact of buyouts and divestitures are expected to make 0.5 point positive impact on the top line growth. Also, unfavorable currency fluctuations are expected to have a 0.5 point negative impact on sales growth.
Further, the company envisions adjusted EPS for 2020 in the range of $6.18–$6.24. This view indicates a rise of 7-8% from the reported figure in 2019.
Shares of this Zacks Rank #3 (Hold) company have gained 0.4% in the past three months against the industry’s decline of 1.8%.
Solid Food Stocks
United Natural Foods (UNFI - Free Report) , with a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 4.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Blue Apron Holdings ,with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 30.3%, on average.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
The Hershey Company (HSY - Free Report) reported robust third-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. Results gained from solid performance in the North America segment. Notably, the company gained confectionary market share of nearly 190 basis points (bps) in the United States.
Earnings & Revenue Discussion
Adjusted earnings per share (EPS) of $1.86 came ahead of the Zacks Consensus Estimate of $1.71, while it increased 15.5% year over year.
Consolidated net sales of $2,219.8 million increased 4% year over year and surpassed the Zacks Consensus Estimate of $2,154.9 million. Price realization and volume growth were 2.9 point and 0.9 point, respectively, thanks to strength in the North America segment. Moreover, the net impact of acquisitions and divestitures was positive to the tune of 0.8 point stemming from benefits of ONE Brands buyout. However, unfavorable foreign currency rates affected sales by 0.6 point. Further, organic sales on a constant-currency (cc) basis increased 3.8%.
Margins in Detail
Adjusted gross margin expanded 60 bps to 45.4% on the back of favorable pricing, which was somewhat offset by unfavorable commodities and escalated warehouse costs.
Selling, marketing and administrative costs dropped 2.6%. Advertising and related consumer marketing expenses fell 4.6%. Selling, marketing and administrative costs excluding advertising and related consumer marketing decreased 1.5%. Pandemic-related travel and meeting cost savings and the timing of investments in key strategic initiatives were a reason.
Adjusted operating profit amounted to $543.3 million, up 13.9% from the prior-year quarter’s figure. Adjusted operating profit margin expanded 220 bps to 24.5% led by solid price realization in the North America segment as well as corporate and operational cost management.
Segmental Update
North America (the United States and Canada) net sales increased 6.3% year over year to $2,014.2 million. Markedly, price realization and net impact of acquisitions and divestitures boosted the unit’s sales by 3.3 points and 0.9 points, respectively. Volumes contributed 2.2 points driven by retailer inventory replenishment and strong consumer takeaway in everyday chocolate and baking products. However, currency translations dented the unit by 0.1 point.
Net sales in the International and Other segment fell 14.4% to $205.7 million. On a cc basis, net sales declined 9.3%. Volumes hit sales by 9.6 points, mainly due to lower sales in the company's owned retail locations. Although retail locations reopened during the quarter, footfall was low stemming from reduced consumer travel and capacity restrictions imposed by government. Also, reduced air travel was a reason. Combined net sales in Mexico, Brazil, China and India, dropped 13.9%. Excluding currency headwinds, combined organic sales from these markets decreased 2.3% at cc. Nevertheless, favorable net price realization of 0.3 points offered some respite.
Financials
Hershey ended the quarter with cash and cash equivalents of $1,205.9 million, long-term debt of $4,093.2 million and total shareholders’ equity of $2,068.8 million.
In a separate press release, the company declared a quarterly dividend of 80.4 cents per share for its common stock and 73.1 cents for Class B common stock. These are payable on Dec 15 to shareholders of record as of Nov 20. Notably, this marks the company’s 364th and 145th straight dividend payout on its common stock and Class B common stock, respectively.
Outlook
Hershey expects net sales to rise nearly 1% for 2020 reflecting a 2 point pandemic-related headwind in International & Other segment. Net impact of buyouts and divestitures are expected to make 0.5 point positive impact on the top line growth. Also, unfavorable currency fluctuations are expected to have a 0.5 point negative impact on sales growth.
Further, the company envisions adjusted EPS for 2020 in the range of $6.18–$6.24. This view indicates a rise of 7-8% from the reported figure in 2019.
Shares of this Zacks Rank #3 (Hold) company have gained 0.4% in the past three months against the industry’s decline of 1.8%.
Solid Food Stocks
United Natural Foods (UNFI - Free Report) , with a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 4.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Blue Apron Holdings ,with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 30.3%, on average.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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