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The Hershey Company (HSY - Free Report) reported stellar first-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as increasing year over year.
Higher prices, improved volumes and contributions from the buyouts drove the quarterly performance. HSY witnessed growth across all its segments. Management raised the net sales and earnings per share (EPS) view for 2022, given strength in the first-quarter performance along with robust expectations for the rest of the year despite inflationary environment.
Shares of this currently Zacks Rank #3 (Hold) player have increased 12.8% in the past three months compared with the industry’s growth of 11.4%.
Hershey posted adjusted earnings of $2.53, surpassing the Zacks Consensus Estimate of $2.10 and surging 31.8% year over year.
Consolidated net sales of $2,666.2 million rose 16.1% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,474.1 million. Organic net sales on constant-currency basis jumped 11.5%.
Net price realization drove 6.9 point benefit, mainly on higher list price in segments. Volume was a 4.6 point benefit on the back of replenishment of distributorinventory levels across the North America Confectionery unit and positive price elasticities. Sales from Pretzels, Dot’s and Lily’s buyouts led to a 4.6-point benefit.
Adjusted gross margin came in at 45.8%, unchanged from the year-ago quarter’s level. Favorable net price realization, timing benefit associated with inventory valuation method and fixed cost leverage were offset by a broad-based supply-chain inflation, higher labor investments as well as increased costs to service more-than-anticipated demand. Negative mix due to the recent buyouts and accelerated growth of the North America Salty Snacks unit also countered the gains.
Selling, marketing and administrative expenses rose 6% year over year, mainly due to increased amortization and operating expenses associated with the recent buyouts. Advertising and related consumer marketing expenses fell 0.7%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 9.9%, led by increased amortization and operating expenses associated with the recent buyouts as well as additional capabilities and technology investments. These were somewhat offset by reduced accruals for incentive compensation.
Adjusted operating profit came in at $707.9 million, up 27.4% year over year. Adjusted operating profit margin expanded 240 basis points to 26.6% on price realization and volume growth in segments. Timing benefit associated with inventory valuation method and fixed cost leverage also contributed to the upside. These more than offset broad-based inflation, escalated supply-chain costs and higher amortization and costs associated with the recent buyouts.
Segment Details
North America Confectionery segment net sales jumped 11.7% year over year to $2,217 million. Price realization contributed to 6.8 points of growth. Volume was a 3.8-point tailwind on the back of distributor inventory replenishment and positive price elasticities. The net impact of Lily’s buyout was a 1.1-point upside.
The North America Salty Snacks segment’s net sales surged 86.2% from the year-ago quarter’s level to $226.1 million. Net price realization contributed 13.2 points to the upside, while volume added a 4-point benefit. The acquisitions of Dot's and Pretzels contributed 69 points to sales.
Net sales in the International segment grew 17.9% to $223.1 million. On constant currency basis, net sales rose 17.7%. Price realization contributed 5.8 points to sales while volume was an 11.9-point tailwind.
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Financials
Hershey ended the quarter with cash and cash equivalents of $338.1 million, a long-term debt of $4,088.4 million and total shareholders’ equity of $2,915.5 million.
In a separate press release, Hershey declared a quarterly dividend of 90.1 cents per share for its common stock and 81.9 cents for Class B common stock. The dividend is payable Jun 15, 2022, to its shareholders of record on May 20, 2022. This marks HSY’s 370th and 151st straight dividend payout on its common stock and Class B common stock, respectively.
Outlook
Management now envisions net sales growth in the band of 10-12% for 2022. The impact of Pretzels, Dot's and Lily's buyouts is likely to be a 4-5 point benefit to net sales growth. Earlier, net sales were expected to grow 8-10%.
Hershey now expects adjusted EPS to increase 10-12% for 2022, while reported EPS growth is likely to be in the 8-11% band. Earlier, management had projected adjusted EPS to increase 9-11%, while reported EPS growth was likely to be in the 7-10% band.
The revised outlook is a result of sustained consumer demand and favorable price elasticities in every segment. Favorable view of customer orders and programs of the recently acquired Dot's and Pretzels businesses were also a reason. Additional profit from increased sales is anticipated to be somewhat offset by supply-chain inflation and increased costs incurred to cater to more demand.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy), currently. PPC has a trailing four-quarter earnings surprise of 24.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year EPS suggests growth of 21.9% from the year-ago reported number.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for McCormick's current financial-year sales and EPS suggests growth of 5% and 3.9%, respectively, from the correspondingyear-ago period’s reported figures. MKC has a trailing four-quarter earnings surprise of 7.3%, on average.
Sysco, the marketer and distributor of food and related products, currently carries a Zacks of 2. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the corresponding year-ago period’s reported figures.
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Hershey (HSY) Beats on Q1 Earnings & Sales, Raises 2022 View
The Hershey Company (HSY - Free Report) reported stellar first-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as increasing year over year.
Higher prices, improved volumes and contributions from the buyouts drove the quarterly performance. HSY witnessed growth across all its segments. Management raised the net sales and earnings per share (EPS) view for 2022, given strength in the first-quarter performance along with robust expectations for the rest of the year despite inflationary environment.
Shares of this currently Zacks Rank #3 (Hold) player have increased 12.8% in the past three months compared with the industry’s growth of 11.4%.
Hershey Company The Price and EPS Surprise
Hershey Company The price-eps-surprise | Hershey Company The Quote
Q1 in Detail
Hershey posted adjusted earnings of $2.53, surpassing the Zacks Consensus Estimate of $2.10 and surging 31.8% year over year.
Consolidated net sales of $2,666.2 million rose 16.1% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,474.1 million. Organic net sales on constant-currency basis jumped 11.5%.
Net price realization drove 6.9 point benefit, mainly on higher list price in segments. Volume was a 4.6 point benefit on the back of replenishment of distributorinventory levels across the North America Confectionery unit and positive price elasticities. Sales from Pretzels, Dot’s and Lily’s buyouts led to a 4.6-point benefit.
Adjusted gross margin came in at 45.8%, unchanged from the year-ago quarter’s level. Favorable net price realization, timing benefit associated with inventory valuation method and fixed cost leverage were offset by a broad-based supply-chain inflation, higher labor investments as well as increased costs to service more-than-anticipated demand. Negative mix due to the recent buyouts and accelerated growth of the North America Salty Snacks unit also countered the gains.
Selling, marketing and administrative expenses rose 6% year over year, mainly due to increased amortization and operating expenses associated with the recent buyouts. Advertising and related consumer marketing expenses fell 0.7%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 9.9%, led by increased amortization and operating expenses associated with the recent buyouts as well as additional capabilities and technology investments. These were somewhat offset by reduced accruals for incentive compensation.
Adjusted operating profit came in at $707.9 million, up 27.4% year over year. Adjusted operating profit margin expanded 240 basis points to 26.6% on price realization and volume growth in segments. Timing benefit associated with inventory valuation method and fixed cost leverage also contributed to the upside. These more than offset broad-based inflation, escalated supply-chain costs and higher amortization and costs associated with the recent buyouts.
Segment Details
North America Confectionery segment net sales jumped 11.7% year over year to $2,217 million. Price realization contributed to 6.8 points of growth. Volume was a 3.8-point tailwind on the back of distributor inventory replenishment and positive price elasticities. The net impact of Lily’s buyout was a 1.1-point upside.
The North America Salty Snacks segment’s net sales surged 86.2% from the year-ago quarter’s level to $226.1 million. Net price realization contributed 13.2 points to the upside, while volume added a 4-point benefit. The acquisitions of Dot's and Pretzels contributed 69 points to sales.
Net sales in the International segment grew 17.9% to $223.1 million. On constant currency basis, net sales rose 17.7%. Price realization contributed 5.8 points to sales while volume was an 11.9-point tailwind.
Image Source: Zacks Investment Research
Financials
Hershey ended the quarter with cash and cash equivalents of $338.1 million, a long-term debt of $4,088.4 million and total shareholders’ equity of $2,915.5 million.
In a separate press release, Hershey declared a quarterly dividend of 90.1 cents per share for its common stock and 81.9 cents for Class B common stock. The dividend is payable Jun 15, 2022, to its shareholders of record on May 20, 2022. This marks HSY’s 370th and 151st straight dividend payout on its common stock and Class B common stock, respectively.
Outlook
Management now envisions net sales growth in the band of 10-12% for 2022. The impact of Pretzels, Dot's and Lily's buyouts is likely to be a 4-5 point benefit to net sales growth. Earlier, net sales were expected to grow 8-10%.
Hershey now expects adjusted EPS to increase 10-12% for 2022, while reported EPS growth is likely to be in the 8-11% band. Earlier, management had projected adjusted EPS to increase 9-11%, while reported EPS growth was likely to be in the 7-10% band.
The revised outlook is a result of sustained consumer demand and favorable price elasticities in every segment. Favorable view of customer orders and programs of the recently acquired Dot's and Pretzels businesses were also a reason. Additional profit from increased sales is anticipated to be somewhat offset by supply-chain inflation and increased costs incurred to cater to more demand.
3 Hot Food Bets
Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , McCormick & Company (MKC - Free Report) and Sysco Corporation (SYY - Free Report) .
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy), currently. PPC has a trailing four-quarter earnings surprise of 24.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year EPS suggests growth of 21.9% from the year-ago reported number.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for McCormick's current financial-year sales and EPS suggests growth of 5% and 3.9%, respectively, from the correspondingyear-ago period’s reported figures. MKC has a trailing four-quarter earnings surprise of 7.3%, on average.
Sysco, the marketer and distributor of food and related products, currently carries a Zacks of 2. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the corresponding year-ago period’s reported figures.