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Hershey (HSY) Looks Promising on Pricing & Prudent Buyouts
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The Hershey Company (HSY - Free Report) appears well placed, courtesy of its robust pricing actions. The leading snacks company’s solid brand portfolio, backed by strategic acquisitions and innovations, is also a key driver.
The abovementioned upsides were evident in the company’s fourth-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Management is optimistic about delivering earnings and sales growth in 2023.
Let’s delve deeper.
Impressive Q4 Results & Bright View
The Zacks Rank #1 (Strong Buy) company’s fourth-quarter 2022 results gained from improved net price realization and higher consumer demand. The company delivered strong results even amid elevated inflation, continued supply-chain hurdles and macroeconomic volatility. The company posted adjusted earnings of $2.02, which increased 19.5% year over year. Consolidated net sales of $2,652.3 million rose 14% from the year-ago quarter’s level. Organic sales on a constant-currency (cc) basis rose 10.7%. Improved consumer demand across segments drove volumes.
Management envisions net sales growth in the band of 6-8% for 2023. This is likely to be mainly fueled by net price realization, with consumer demand staying steady. Management expects sales and gross margin growth to outpace higher brand, capability and technology investments, along with escalated pension and interest costs. Hershey envisions a reported earnings per share (EPS) increase of 11-15% and adjusted EPS growth of 9-11%.
Image Source: Zacks Investment Research
Pricing Actions Solid
Hershey is undertaking strategic pricing initiatives to improve its performance. In fourth-quarter 2022, net price realization contributed 8.5 points to organic net sales growth. The company’s net price realization increased across the North America Confectionery, North America Salty Snacks and International units. In its last earnings call, management highlighted that net price realization and greater levels of productivity are likely to keep offsetting the persistent cost of goods, labor, packaging and logistics inflation through 2023.
Prudent Acquisitions: Key Driver
Hershey has been undertaking buyouts to augment portfolio strength and boost revenues. In December 2021, Hershey acquired Dot’s Pretzels LLC — the owner of Dot’s Homestyle Pretzels, a leading brand in the pretzel category. The addition of Dot’s Pretzels is a perfect match for Hershey’s growing salty snacking portfolio. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition further expands Hershey’s snacking and production capabilities. In the fourth quarter of 2022, Hershey’s net sales included a 3.6-point benefit from the Pretzels and Dot's buyouts.
On Jun 25, 2021, Hershey concluded the acquisition of Lily's, a leading better-for-you (BFY) confectionery brand. The buyout is in tandem with Hershey’s focus on creating an impressive BFY confection portfolio as part of its multi-pronged, better-for-you snacking strategy.
Brand Strength & Focus on Innovation
Hershey’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly on the back of advertising investments, in-store merchandising and programming and innovation. In its last earnings call, management highlighted that its Reese’s retail sales grew 10.5% for 2022 despite capacity constraints. In fact, retail sales for Skinny Pop, Pirate’s Booty and Dot’s have more than doubled over the last three years.
Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs.
We believe that the aforementioned upsides are likely to fuel growth for Hershey
HSY’s stock has risen 4.4% in the past three months compared with the industry’s growth of 3.5%.
Conagra, a consumer-packaged goods food company, currently sports a Zacks Rank #1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Conagra’s current fiscal-year sales and earnings suggests growth of 7.2% and 12.7%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, which is a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 52.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests an increase of 19.6% and 90.4%, respectively, from the year-ago reported number.
Mondelez International, which manufactures, markets, and sells snack food and beverage products, carries a Zacks Rank 2. MDLZ has a trailing four-quarter earnings surprise of 7.5%, on average.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 9% and 7.5%, respectively, from the corresponding year-ago reported figures.
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Hershey (HSY) Looks Promising on Pricing & Prudent Buyouts
The Hershey Company (HSY - Free Report) appears well placed, courtesy of its robust pricing actions. The leading snacks company’s solid brand portfolio, backed by strategic acquisitions and innovations, is also a key driver.
The abovementioned upsides were evident in the company’s fourth-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. Management is optimistic about delivering earnings and sales growth in 2023.
Let’s delve deeper.
Impressive Q4 Results & Bright View
The Zacks Rank #1 (Strong Buy) company’s fourth-quarter 2022 results gained from improved net price realization and higher consumer demand. The company delivered strong results even amid elevated inflation, continued supply-chain hurdles and macroeconomic volatility. The company posted adjusted earnings of $2.02, which increased 19.5% year over year. Consolidated net sales of $2,652.3 million rose 14% from the year-ago quarter’s level. Organic sales on a constant-currency (cc) basis rose 10.7%. Improved consumer demand across segments drove volumes.
Management envisions net sales growth in the band of 6-8% for 2023. This is likely to be mainly fueled by net price realization, with consumer demand staying steady. Management expects sales and gross margin growth to outpace higher brand, capability and technology investments, along with escalated pension and interest costs. Hershey envisions a reported earnings per share (EPS) increase of 11-15% and adjusted EPS growth of 9-11%.
Image Source: Zacks Investment Research
Pricing Actions Solid
Hershey is undertaking strategic pricing initiatives to improve its performance. In fourth-quarter 2022, net price realization contributed 8.5 points to organic net sales growth. The company’s net price realization increased across the North America Confectionery, North America Salty Snacks and International units. In its last earnings call, management highlighted that net price realization and greater levels of productivity are likely to keep offsetting the persistent cost of goods, labor, packaging and logistics inflation through 2023.
Prudent Acquisitions: Key Driver
Hershey has been undertaking buyouts to augment portfolio strength and boost revenues. In December 2021, Hershey acquired Dot’s Pretzels LLC — the owner of Dot’s Homestyle Pretzels, a leading brand in the pretzel category. The addition of Dot’s Pretzels is a perfect match for Hershey’s growing salty snacking portfolio. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition further expands Hershey’s snacking and production capabilities. In the fourth quarter of 2022, Hershey’s net sales included a 3.6-point benefit from the Pretzels and Dot's buyouts.
On Jun 25, 2021, Hershey concluded the acquisition of Lily's, a leading better-for-you (BFY) confectionery brand. The buyout is in tandem with Hershey’s focus on creating an impressive BFY confection portfolio as part of its multi-pronged, better-for-you snacking strategy.
Brand Strength & Focus on Innovation
Hershey’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly on the back of advertising investments, in-store merchandising and programming and innovation. In its last earnings call, management highlighted that its Reese’s retail sales grew 10.5% for 2022 despite capacity constraints. In fact, retail sales for Skinny Pop, Pirate’s Booty and Dot’s have more than doubled over the last three years.
Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs.
We believe that the aforementioned upsides are likely to fuel growth for Hershey
HSY’s stock has risen 4.4% in the past three months compared with the industry’s growth of 3.5%.
Other Top-Ranked Food Bets
Some other top-ranked stocks are Conagra Brands (CAG - Free Report) , Lamb Weston (LW - Free Report) and Mondelez International, Inc. (MDLZ - Free Report) .
Conagra, a consumer-packaged goods food company, currently sports a Zacks Rank #1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Conagra’s current fiscal-year sales and earnings suggests growth of 7.2% and 12.7%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, which is a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 52.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests an increase of 19.6% and 90.4%, respectively, from the year-ago reported number.
Mondelez International, which manufactures, markets, and sells snack food and beverage products, carries a Zacks Rank 2. MDLZ has a trailing four-quarter earnings surprise of 7.5%, on average.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 9% and 7.5%, respectively, from the corresponding year-ago reported figures.