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Is Hershey (HSY) Poised to Beat Earnings Estimate in Q3?
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The Hershey Company (HSY - Free Report) is slated to release third-quarter 2020 results on Nov 6. This renowned chocolate company delivered an earnings surprise of nearly 17% in the last reported quarter. Notably, Hershey has a trailing four-quarter earnings surprise of 4.02%, on average.
The Zacks Consensus Estimate for earnings in the third quarter has been revised upward by a penny to $1.71 per share in the past 30 days. This suggests growth of 6.2% from the figure reported in the year-ago period. The consensus mark for revenues stands at $2.15 billion, indicating growth of 1% from the year-ago period’s reported figure.
Hershey has been benefiting from its solid brands that have helped gain market share even amid the pandemic, recording growth of 225 basis points in the second quarter. Further, it has been witnessing robust sales growth in North America in the past few months, backed by increased at-home consumption and solid price realization. The company has particularly been witnessing strength in food, mass, dollar and e-commerce channel, which are likely to have contributed to sales growth in the to-be-reported quarter.
Although it witnessed declines in the non-traditional channels like food service and specialty retail in the past few months, these channels reflected sequential improvements in the second quarter as consumers returned to normal activities. These are also likely to have boosted sales trends in the third quarter.
On its second-quarter earnings call, management predicted stronger second-half sales for the North America unit on continued higher at-home consumption, sales recovery in food service and specialty retail networks, price realization, and replenishment of retailer and distributor inventory levels. Also, the company anticipated accelerated overall sales growth in the second half of 2020, based on the momentum witnessed so far and assumption that consumer trends will remain undisrupted.
Moreover, it has been gaining from its Margin for Growth program, aimed at improving the operating margin through supply-chain optimization, streamlining the operating model and reducing administrative expenses. Notably, the solid cost management and price realization helped counter COVID-19-related cost pressures, resulting in margin and bottom-line growth in the second quarter. The continuation of these trends is likely to have boosted earnings in the third quarter.
On the last reported quarter’s earnings call, management anticipated pricing and cost management to continue to drive margin expansion in the second half of 2020, which indicates favorable margins for the third quarter.
However, overall sales have been impacted by weakness in the International & Other segment due to the pandemic as well as currency headwinds. Management anticipates a slower recovery in the International unit, which suggests continued softness in the third quarter. This is likely to have impacted the overall top-line performance.
Additionally, the company expects the divestiture of Krave, Dagoba and Scharffenberger brands (in the second quarter of 2020) to hurt overall company sales by 20 basis points in the second half, though it will not have any impact on the bottom line.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Hershey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Hershey currently has a Zacks Rank #3 and an Earnings ESP of +2.17%.
Other Stocks With Favorable Combinations
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.
Grocery Outlet Holding Corp. (GO - Free Report) currently has an Earnings ESP of +10.76% and a Zacks Rank #2.
Tyson Foods, Inc. (TSN - Free Report) has an Earnings ESP of +9.57% and a Zacks Rank #3 at present.
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Is Hershey (HSY) Poised to Beat Earnings Estimate in Q3?
The Hershey Company (HSY - Free Report) is slated to release third-quarter 2020 results on Nov 6. This renowned chocolate company delivered an earnings surprise of nearly 17% in the last reported quarter. Notably, Hershey has a trailing four-quarter earnings surprise of 4.02%, on average.
The Zacks Consensus Estimate for earnings in the third quarter has been revised upward by a penny to $1.71 per share in the past 30 days. This suggests growth of 6.2% from the figure reported in the year-ago period. The consensus mark for revenues stands at $2.15 billion, indicating growth of 1% from the year-ago period’s reported figure.
Hershey Company The Price and EPS Surprise
Hershey Company The price-eps-surprise | Hershey Company The Quote
Key Factors to Note
Hershey has been benefiting from its solid brands that have helped gain market share even amid the pandemic, recording growth of 225 basis points in the second quarter. Further, it has been witnessing robust sales growth in North America in the past few months, backed by increased at-home consumption and solid price realization. The company has particularly been witnessing strength in food, mass, dollar and e-commerce channel, which are likely to have contributed to sales growth in the to-be-reported quarter.
Although it witnessed declines in the non-traditional channels like food service and specialty retail in the past few months, these channels reflected sequential improvements in the second quarter as consumers returned to normal activities. These are also likely to have boosted sales trends in the third quarter.
On its second-quarter earnings call, management predicted stronger second-half sales for the North America unit on continued higher at-home consumption, sales recovery in food service and specialty retail networks, price realization, and replenishment of retailer and distributor inventory levels. Also, the company anticipated accelerated overall sales growth in the second half of 2020, based on the momentum witnessed so far and assumption that consumer trends will remain undisrupted.
Moreover, it has been gaining from its Margin for Growth program, aimed at improving the operating margin through supply-chain optimization, streamlining the operating model and reducing administrative expenses. Notably, the solid cost management and price realization helped counter COVID-19-related cost pressures, resulting in margin and bottom-line growth in the second quarter. The continuation of these trends is likely to have boosted earnings in the third quarter.
On the last reported quarter’s earnings call, management anticipated pricing and cost management to continue to drive margin expansion in the second half of 2020, which indicates favorable margins for the third quarter.
However, overall sales have been impacted by weakness in the International & Other segment due to the pandemic as well as currency headwinds. Management anticipates a slower recovery in the International unit, which suggests continued softness in the third quarter. This is likely to have impacted the overall top-line performance.
Additionally, the company expects the divestiture of Krave, Dagoba and Scharffenberger brands (in the second quarter of 2020) to hurt overall company sales by 20 basis points in the second half, though it will not have any impact on the bottom line.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Hershey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Hershey currently has a Zacks Rank #3 and an Earnings ESP of +2.17%.
Other Stocks With Favorable Combinations
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.
Purple Innovation, Inc. (PRPL - Free Report) presently has an Earnings ESP of +5.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Grocery Outlet Holding Corp. (GO - Free Report) currently has an Earnings ESP of +10.76% and a Zacks Rank #2.
Tyson Foods, Inc. (TSN - Free Report) has an Earnings ESP of +9.57% and a Zacks Rank #3 at present.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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