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The Hershey Company (HSY - Free Report) reported stellar third-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Results gained from higher brand investments and enhanced supply chain, which supported the company’s consumer demand and fueled category growth in all business segments
Considering the solid performance and impressive fourth-quarter projections, management is raising its full-year guidance.
Q3 in Detail
Hershey posted adjusted earnings of $2.17, surpassing the Zacks Consensus Estimate of $2.07 and increasing 3.3% year over year.
Consolidated net sales of $2,728.2 million rose 15.6% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,618.5 million. Net sales included a 4.1-point benefit from the Pretzels and Dot's buyouts. Organic sales on a constant-currency (cc) basis increased 11.8%. The upside can be attributed to increased list price, solid consumer demand and favorable price elasticities.
Adjusted gross margin came in at 42.5%, down 180 basis points (bps). The downside can be attributed to raw material, packaging and logistics inflation and labor investments. Increased supply chain costs stemming from sustained consumer demand also hurt the metric. In addition, an unfavorable mix from recent buyouts was a hurdle. These factors were somewhat offset by net price realization and volume gains.
Hershey Company The Price, Consensus and EPS Surprise
Selling, marketing and administrative expenses rose 13.5% year over year, mainly due to increased corporate expenses and acquisition-related costs. Advertising and related consumer marketing expenses increased 5.4%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 17.8%. The increase was caused by acquisition-related costs, including amortization, integration and operating expenses and people, capability and technology investments.
Adjusted operating profit came in at $615.3 million, up 9.3%. The upside can be attributed to pricing, volume and cost leverage. These were somewhat offset by inflation, higher supply chain costs, acquisition-related costs and brand, capabilities and people investments. However, the adjusted operating profit margin contracted 130 basis points to 22.6% due to inflation and investments.
Segment Details
North America Confectionery segment net sales increased 10.4% year over year to $2,235.6 million. Organic net sales at cc rose 10.7%. Net price realization was fueled by mid to high single-digit list price increases in the confectionery portfolio. Previous seasonal shipments compared with the prior-year period and continued replenishment of distributor inventory levels led to volume improvement in the segment.
The North America Salty Snacks segment’s net sales surged 86.9% from the year-ago quarter’s level to $275 million. The acquisitions of Dot's and Pretzels contributed 65.5 points to sales. Organic net sales at cc grew 21.4%, owing to volume gains from solid consumer demand and net price realization.
Net sales in the International segment grew 15.4% to $217.6 million. On a cc basis, organic net sales rose 16.6%, fueled by increased volumes from solid consumer demand and net price realization.
Image Source: Zacks Investment Research
Financials
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $327.7 million, long-term debt of $3,340.7 million and total shareholders’ equity of $3,083.1 million.
Hershey declared a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for Class B common stock. The dividend is payable on Dec 15, 2022, to its shareholders of record on Nov 18, 2022. This marks HSY’s 372nd and 153rd straight dividend payout on its common stock and Class B common stock, respectively.
2022 Outlook
The company raised its net sales growth and earnings per share (EPS) view to reflect greater-than-expected consumer demand and positive price elasticities across segments.
Management now envisions net sales growth in the band of 14-15% for 2022. Earlier, net sales were expected to grow 12-14%. The impact of Pretzels, Dot's and Lily's buyouts are likely to be a 4-5 point benefit to net sales growth.
Hershey now expects adjusted EPS in the range of $8.20-$8.27, up 14-15% for 2022, while reported EPS growth is likely to be in the 11-13% band. Earlier, management had projected adjusted EPS to increase 12-14%, while reported EPS growth was likely in the 9-12% band.
Hershey’s shares have increased 2.2% in the past three months compared with the industry’s growth of 4.8%.
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
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 12.4%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales EPS suggests decline of 8.3% from the year-ago reported figures.
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Hershey (HSY) Beats on Q3 Earnings & Sales, Raises 2022 View
The Hershey Company (HSY - Free Report) reported stellar third-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Results gained from higher brand investments and enhanced supply chain, which supported the company’s consumer demand and fueled category growth in all business segments
Considering the solid performance and impressive fourth-quarter projections, management is raising its full-year guidance.
Q3 in Detail
Hershey posted adjusted earnings of $2.17, surpassing the Zacks Consensus Estimate of $2.07 and increasing 3.3% year over year.
Consolidated net sales of $2,728.2 million rose 15.6% from the year-ago quarter’s level and beat the Zacks Consensus Estimate of $2,618.5 million. Net sales included a 4.1-point benefit from the Pretzels and Dot's buyouts. Organic sales on a constant-currency (cc) basis increased 11.8%. The upside can be attributed to increased list price, solid consumer demand and favorable price elasticities.
Adjusted gross margin came in at 42.5%, down 180 basis points (bps). The downside can be attributed to raw material, packaging and logistics inflation and labor investments. Increased supply chain costs stemming from sustained consumer demand also hurt the metric. In addition, an unfavorable mix from recent buyouts was a hurdle. These factors were somewhat offset by net price realization and volume gains.
Hershey Company The Price, Consensus and EPS Surprise
Hershey Company The price-consensus-eps-surprise-chart | Hershey Company The Quote
Selling, marketing and administrative expenses rose 13.5% year over year, mainly due to increased corporate expenses and acquisition-related costs. Advertising and related consumer marketing expenses increased 5.4%. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, rose 17.8%. The increase was caused by acquisition-related costs, including amortization, integration and operating expenses and people, capability and technology investments.
Adjusted operating profit came in at $615.3 million, up 9.3%. The upside can be attributed to pricing, volume and cost leverage. These were somewhat offset by inflation, higher supply chain costs, acquisition-related costs and brand, capabilities and people investments. However, the adjusted operating profit margin contracted 130 basis points to 22.6% due to inflation and investments.
Segment Details
North America Confectionery segment net sales increased 10.4% year over year to $2,235.6 million. Organic net sales at cc rose 10.7%. Net price realization was fueled by mid to high single-digit list price increases in the confectionery portfolio. Previous seasonal shipments compared with the prior-year period and continued replenishment of distributor inventory levels led to volume improvement in the segment.
The North America Salty Snacks segment’s net sales surged 86.9% from the year-ago quarter’s level to $275 million. The acquisitions of Dot's and Pretzels contributed 65.5 points to sales. Organic net sales at cc grew 21.4%, owing to volume gains from solid consumer demand and net price realization.
Net sales in the International segment grew 15.4% to $217.6 million. On a cc basis, organic net sales rose 16.6%, fueled by increased volumes from solid consumer demand and net price realization.
Image Source: Zacks Investment Research
Financials
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $327.7 million, long-term debt of $3,340.7 million and total shareholders’ equity of $3,083.1 million.
Hershey declared a quarterly dividend of $1.036 per share for its common stock and 94.2 cents for Class B common stock. The dividend is payable on Dec 15, 2022, to its shareholders of record on Nov 18, 2022. This marks HSY’s 372nd and 153rd straight dividend payout on its common stock and Class B common stock, respectively.
2022 Outlook
The company raised its net sales growth and earnings per share (EPS) view to reflect greater-than-expected consumer demand and positive price elasticities across segments.
Management now envisions net sales growth in the band of 14-15% for 2022. Earlier, net sales were expected to grow 12-14%. The impact of Pretzels, Dot's and Lily's buyouts are likely to be a 4-5 point benefit to net sales growth.
Hershey now expects adjusted EPS in the range of $8.20-$8.27, up 14-15% for 2022, while reported EPS growth is likely to be in the 11-13% band. Earlier, management had projected adjusted EPS to increase 12-14%, while reported EPS growth was likely in the 9-12% band.
Hershey’s shares have increased 2.2% in the past three months compared with the industry’s growth of 4.8%.
Some Solid Food Bets
Some better-ranked stocks are TreeHouse Foods (THS - Free Report) , Lamb Weston (LW - Free Report) and Medifast (MED - Free Report) .
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
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 12.4%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales EPS suggests decline of 8.3% from the year-ago reported figures.