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The Hershey Company (HSY - Free Report) reported stellar second-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Higher prices, improved volumes and buyout contributions drove the quarterly performance. HSY witnessed growth across all its segments. Considering the solid performance and impressive second-half 2022 projections, management is raising its full-year guidance.
Hershey Company The Price, Consensus and EPS Surprise
Hershey posted adjusted earnings of $1.80, surpassing the Zacks Consensus Estimate of $1.69 and increasing 22.4% year over year.
Consolidated net sales of $2,372.6 million rose 19.3% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,226.6 million. Net sales included a 5.3 point benefit from the Pretzels, Dot's and Lily's buyouts. Unfavorable currency rates hurt the metric by 0.1 point.
Organic net sales on a constant-currency (cc) basis rose 14.1%, courtesy of favorable pricing and volume in segments. Net price realization contributed 9.5 points to net sales growth, fueled by higher list price and moderately reduced levels of promotional activity. Volume was a 4.6 point benefit driven by replenishment of distributor inventory levels, mainly in the North America Confectionery unit. Also, positive price elasticities across the North America Salty Snacks and International divisions were an upside to the volumes.
Adjusted gross margin came in at 43.9%, down 250 basis points (bps). The downside was caused by increased raw material, packaging and logistics cost inflation and labor investments. Also, the unfavorable mix from recent buyouts was a headwind. Nevertheless, accelerating net price realization and volume gains offered some respite.
Selling, marketing and administrative expenses rose 16.2% year over year, mainly due to increased amortization, integration and operating costs associated with recent buyouts. Advertising and related consumer marketing expenses grew 3.2%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 22.4% thanks to a loss related to the sale of non-operating assets, increased acquisition-related costs, additional capabilities and technology investments, among other reasons.
Adjusted operating profit came in at $526.9 million, up 14.7% year over year, fueled by pricing and volume gains. These were somewhat offset by broad-based inflation, buyout-related expenses and increased advertising, capability and technology investments. However, the adjusted operating profit margin contracted 90 bps to 22.2%.
Segment Details
North America Confectionery segment net sales jumped 12.9% year over year to $1,909.1 million. Organic net sales at cc rose 12.4%. Net price realization contributed to 9.8 points of growth led by higher list price increases and reduced promotional activity. Volume was a 2.6-point tailwind on the back of distributor inventory replenishment.
The North America Salty Snacks segment’s net sales surged 99.9% from the year-ago quarter’s level to $256.3 million. Net price realization contributed 14.6 points to the upside, while volume added a 13.7 point benefit. The acquisitions of Dot's and Pretzels contributed 71.6 points to sales.
Net sales in the International segment grew 21.3% to $207.2 million. On a cc basis, net sales rose 20.6%. Price realization contributed 3 points to sales while volume was a 17.6 point tailwind.
Financials
The Zacks Rank #1 (Strong Buy) company ended the quarter with cash and cash equivalents of $339.7 million, long-term debt of $3,340.5 million and total shareholders’ equity of $2,891.7 million.
Hershey declared a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for Class B common stock, reflecting a 15% hike. The dividend is payable Sep 15, 2022, to its shareholders of record on Aug 19, 2022. This marks HSY’s 371st and 152nd straight dividend payout on its common stock and Class B common stock, respectively.
Image Source: Zacks Investment Research
2022 Outlook
The raised net sales view takes into account strong consumer demand and net price realization. Management expects price elasticities to moderate from the second quarter yet remain favorable to historical levels.
The company expects profit from higher sales growth to more than offset increased supply chain costs, higher advertising and merchandising levels and increased incentive compensation costs. This will result in improved adjusted earnings per share (EPS) growth.
Management now envisions net sales growth in the band of 12-14% for 2022. The impact of Pretzels, Dot's and Lily's buyouts are likely to be a 4-5 point benefit to net sales growth. Earlier, net sales were expected to grow 10-12%.
Hershey now expects adjusted EPS to increase 12-14% for 2022, while reported EPS growth is likely to be in the 9-12% band. Earlier, management had projected adjusted EPS to increase 10-12%, while reported EPS growth was likely to be in the 8-11% band.
Hershey’s shares have increased 22.3% in the past year compared with the industry’s growth of 108.2%.
Lamb Weston, which produces, distributes and markets value-added frozen potato products, sports a Zacks Rank #1 at present. LW has a trailing four-quarter earnings surprise of 18.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LW’s current financial year sales suggests growth of 9.3% from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial-year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the corresponding year-ago reported figures.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2. GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and EPS suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.
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Hershey (HSY) Beats on Q2 Earnings & Sales, Raises 2022 View
The Hershey Company (HSY - Free Report) reported stellar second-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Higher prices, improved volumes and buyout contributions drove the quarterly performance. HSY witnessed growth across all its segments. Considering the solid performance and impressive second-half 2022 projections, management is raising its full-year guidance.
Hershey Company The Price, Consensus and EPS Surprise
Hershey Company The price-consensus-eps-surprise-chart | Hershey Company The Quote
Q2 in Detail
Hershey posted adjusted earnings of $1.80, surpassing the Zacks Consensus Estimate of $1.69 and increasing 22.4% year over year.
Consolidated net sales of $2,372.6 million rose 19.3% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,226.6 million. Net sales included a 5.3 point benefit from the Pretzels, Dot's and Lily's buyouts. Unfavorable currency rates hurt the metric by 0.1 point.
Organic net sales on a constant-currency (cc) basis rose 14.1%, courtesy of favorable pricing and volume in segments. Net price realization contributed 9.5 points to net sales growth, fueled by higher list price and moderately reduced levels of promotional activity. Volume was a 4.6 point benefit driven by replenishment of distributor inventory levels, mainly in the North America Confectionery unit. Also, positive price elasticities across the North America Salty Snacks and International divisions were an upside to the volumes.
Adjusted gross margin came in at 43.9%, down 250 basis points (bps). The downside was caused by increased raw material, packaging and logistics cost inflation and labor investments. Also, the unfavorable mix from recent buyouts was a headwind. Nevertheless, accelerating net price realization and volume gains offered some respite.
Selling, marketing and administrative expenses rose 16.2% year over year, mainly due to increased amortization, integration and operating costs associated with recent buyouts. Advertising and related consumer marketing expenses grew 3.2%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 22.4% thanks to a loss related to the sale of non-operating assets, increased acquisition-related costs, additional capabilities and technology investments, among other reasons.
Adjusted operating profit came in at $526.9 million, up 14.7% year over year, fueled by pricing and volume gains. These were somewhat offset by broad-based inflation, buyout-related expenses and increased advertising, capability and technology investments. However, the adjusted operating profit margin contracted 90 bps to 22.2%.
Segment Details
North America Confectionery segment net sales jumped 12.9% year over year to $1,909.1 million. Organic net sales at cc rose 12.4%. Net price realization contributed to 9.8 points of growth led by higher list price increases and reduced promotional activity. Volume was a 2.6-point tailwind on the back of distributor inventory replenishment.
The North America Salty Snacks segment’s net sales surged 99.9% from the year-ago quarter’s level to $256.3 million. Net price realization contributed 14.6 points to the upside, while volume added a 13.7 point benefit. The acquisitions of Dot's and Pretzels contributed 71.6 points to sales.
Net sales in the International segment grew 21.3% to $207.2 million. On a cc basis, net sales rose 20.6%. Price realization contributed 3 points to sales while volume was a 17.6 point tailwind.
Financials
The Zacks Rank #1 (Strong Buy) company ended the quarter with cash and cash equivalents of $339.7 million, long-term debt of $3,340.5 million and total shareholders’ equity of $2,891.7 million.
Hershey declared a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for Class B common stock, reflecting a 15% hike. The dividend is payable Sep 15, 2022, to its shareholders of record on Aug 19, 2022. This marks HSY’s 371st and 152nd straight dividend payout on its common stock and Class B common stock, respectively.
Image Source: Zacks Investment Research
2022 Outlook
The raised net sales view takes into account strong consumer demand and net price realization. Management expects price elasticities to moderate from the second quarter yet remain favorable to historical levels.
The company expects profit from higher sales growth to more than offset increased supply chain costs, higher advertising and merchandising levels and increased incentive compensation costs. This will result in improved adjusted earnings per share (EPS) growth.
Management now envisions net sales growth in the band of 12-14% for 2022. The impact of Pretzels, Dot's and Lily's buyouts are likely to be a 4-5 point benefit to net sales growth. Earlier, net sales were expected to grow 10-12%.
Hershey now expects adjusted EPS to increase 12-14% for 2022, while reported EPS growth is likely to be in the 9-12% band. Earlier, management had projected adjusted EPS to increase 10-12%, while reported EPS growth was likely to be in the 8-11% band.
Hershey’s shares have increased 22.3% in the past year compared with the industry’s growth of 108.2%.
3 Hot Food Bets
Some better-ranked stocks are Lamb Weston (LW - Free Report) , Medifast (MED - Free Report) and General Mills, Inc. (GIS - Free Report) .
Lamb Weston, which produces, distributes and markets value-added frozen potato products, sports a Zacks Rank #1 at present. LW has a trailing four-quarter earnings surprise of 18.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LW’s current financial year sales suggests growth of 9.3% from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial-year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the corresponding year-ago reported figures.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2. GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and EPS suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.