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Hershey's (HSY) Brand Strength, Pricing Aid Amid Cost Woes
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The Hershey Company (HSY - Free Report) has been pursuing buyouts to bolster its portfolio strength and amplify its revenue streams. This corporate strategy was further underlined by its agreement inked in April 2023 to acquire two production facilities from Weaver Popcorn Manufacturing.
This move comes in conjunction with Hershey's ongoing pursuit of expanding its reach within the popcorn production and co-packing sector. This strategic move not only enables Hershey to nurture continued growth of its SkinnyPop brand through supply-chain expansion but also secures its position in the ever-growing popcorn market.
Hershey's acquisition strategy is backed by its continuous efforts to fortify production capacity. One of its notable endeavors is the construction of a chocolate-making facility in Hershey, PA. This facility is projected to boost production capacity by 5% in 2023, demonstrating Hershey's commitment to optimizing its network for enhanced output, margins, utilization rates and service levels.
Image Source: Zacks Investment Research
Pricing & Brand Strength
An integral aspect of Hershey's strategy revolves around its pricing initiatives. In the second quarter of 2023, the company's focus on strategic pricing led to a significant contribution of 7.7% to organic net sales growth. This strategy was particularly impactful in the North America Confectionery and Salty Snacks segments.
The company’s stronghold lies in its brand portfolio, with iconic names such as Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit, and Ice Breakers. These core brands have experienced strong growth, driven by investments in advertising, in-store merchandising, programming and innovation. Hershey's commitment to innovation is also evident, as it continuously introduces novel offerings to meet evolving consumer preferences and unmet needs.
Cost Burden
However, Hershey has been grappling with the persistent escalating selling, marketing and administrative expenses. In the second quarter of 2023, the company witnessed a 5.2% year-over-year increase in this metric, primarily driven by elevated investments in media and capabilities. This was largely attributed to factors such as wage and benefits inflation, and investments in capabilities and technology.
The ongoing challenge in cost management has put pressure on Hershey's operational efficiency and profitability.
Wrapping Up
The above-mentioned upsides place Hershey well despite cost-related hurdles. Management envisions net sales growth of 8% for 2023. Adjusted EPS is envisioned to increase 11-12% to $9.46-$9.54 in 2023.
Shares of this Zacks Rank #3 (Hold) company have lost 8.2% over the past six months compared with the industry’s decline of 7.9%.
Bet Your Bucks on These Hot Stocks
Here we have highlighted three better-ranked stocks, namely Post Holdings (POST - Free Report) , Grocery Outlet Holding Corp. (GO - Free Report) and Flowers Foods (FLO - Free Report) .
Post Holdings, a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 13.5% and 184.5% from the year-ago period’s actuals. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
Grocery Outlet is a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products. It currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 12.2%.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 3.9% from the year-ago period’s actuals. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Flowers Foods emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.
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Hershey's (HSY) Brand Strength, Pricing Aid Amid Cost Woes
The Hershey Company (HSY - Free Report) has been pursuing buyouts to bolster its portfolio strength and amplify its revenue streams. This corporate strategy was further underlined by its agreement inked in April 2023 to acquire two production facilities from Weaver Popcorn Manufacturing.
This move comes in conjunction with Hershey's ongoing pursuit of expanding its reach within the popcorn production and co-packing sector. This strategic move not only enables Hershey to nurture continued growth of its SkinnyPop brand through supply-chain expansion but also secures its position in the ever-growing popcorn market.
Hershey's acquisition strategy is backed by its continuous efforts to fortify production capacity. One of its notable endeavors is the construction of a chocolate-making facility in Hershey, PA. This facility is projected to boost production capacity by 5% in 2023, demonstrating Hershey's commitment to optimizing its network for enhanced output, margins, utilization rates and service levels.
Image Source: Zacks Investment Research
Pricing & Brand Strength
An integral aspect of Hershey's strategy revolves around its pricing initiatives. In the second quarter of 2023, the company's focus on strategic pricing led to a significant contribution of 7.7% to organic net sales growth. This strategy was particularly impactful in the North America Confectionery and Salty Snacks segments.
The company’s stronghold lies in its brand portfolio, with iconic names such as Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit, and Ice Breakers. These core brands have experienced strong growth, driven by investments in advertising, in-store merchandising, programming and innovation. Hershey's commitment to innovation is also evident, as it continuously introduces novel offerings to meet evolving consumer preferences and unmet needs.
Cost Burden
However, Hershey has been grappling with the persistent escalating selling, marketing and administrative expenses. In the second quarter of 2023, the company witnessed a 5.2% year-over-year increase in this metric, primarily driven by elevated investments in media and capabilities. This was largely attributed to factors such as wage and benefits inflation, and investments in capabilities and technology.
The ongoing challenge in cost management has put pressure on Hershey's operational efficiency and profitability.
Wrapping Up
The above-mentioned upsides place Hershey well despite cost-related hurdles. Management envisions net sales growth of 8% for 2023. Adjusted EPS is envisioned to increase 11-12% to $9.46-$9.54 in 2023.
Shares of this Zacks Rank #3 (Hold) company have lost 8.2% over the past six months compared with the industry’s decline of 7.9%.
Bet Your Bucks on These Hot Stocks
Here we have highlighted three better-ranked stocks, namely Post Holdings (POST - Free Report) , Grocery Outlet Holding Corp. (GO - Free Report) and Flowers Foods (FLO - Free Report) .
Post Holdings, a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 13.5% and 184.5% from the year-ago period’s actuals. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
Grocery Outlet is a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products. It currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 12.2%.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 3.9% from the year-ago period’s actuals. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Flowers Foods emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.