We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Hershey (HSY) Looks Promising on Pricing Actions & Innovations
Read MoreHide Full Article
The Hershey Company (HSY - Free Report) appears well positioned on robust pricing actions. The leading snacks company boosts a portfolio of solid brands courtesy of prudent buyouts. The company continues to invest in its brands and capabilities to drive growth.
These upsides fueled third-quarter 2023 results, with net sales and earnings surpassing the Zacks Consensus Estimate and increasing year over year. Impressively, Hershey expects net sales growth of nearly 8% in 2023. Adjusted earnings per share (EPS) is envisioned to increase 11-12% to the $9.46-$9.54 band in 2023.
Let’s delve deeper.
Pricing Strategies Fuels Growth
Hershey has been undertaking strategic pricing initiatives to improve its performance. The trend continued in the third quarter of 2023 with solid top-line growth and improved margins. Quarterly organic sales on a constant-currency (cc) basis increased 10.7%, fueled by price realization. In the North America Confectionery segment, price realization contributed 11 points of growth. Management expects pricing to have a high-single-digit benefit for the segment during the fourth quarter. The North America Salty Snacks segment’s net sales increased 25.5%, courtesy of favorable price realization and volumes.
Image Source: Zacks Investment Research
Strategic Buyouts & Innovations Aid
The Zacks Rank #3 (Hold) company is undertaking buyouts to augment portfolio strength and boost revenues. In April 2023, the company signed an agreement to acquire two production facilities from Weaver Popcorn Manufacturing — a well-known leader in popcorn production and co-packing and a co-manufacturer of Hershey’s SkinnyPop brand.
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. Dot’s Pretzels remained strong in the third quarter of 2023, fueled by solid category growth and share gains in measured and non-measured channels. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition expands its snacking and production capabilities.
Hershey markets some of the world’s leading brands, which enjoy widespread consumer acceptance. The company is a global leader in sugar confectionery products, which is an attractive category as confectionery products are readily available, affordable and highly indulgent, thus making the industry almost recession-resistant. Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. In its last earnings call, management highlighted that it has a robust pipeline of innovations for 2024. It is committed to supporting brands through solid media marketing.
High Costs Stay
Hershey has been grappling with higher selling, marketing and administrative expenses for a while. In the third quarter of 2023, the company’s SG&A expenses rose 13.1% on increased levels of media and capability investments. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased by 9.9% due to wage and benefits inflation, capability and technology investments.
In the fourth quarter, management expects advertising spending to grow double-digit as it continues to support the sell-through of seasonal items and starts to reactivate the Salty Snacks brands post-ERP transition. The company expects non-advertising SG&A spending to rise in low-single-digits, reflecting some increase in technology and capability investments.
That being said, we believe that HSY’s pricing actions, coupled with other upsides, are likely to keep its growth story going.
HSY’s stock has dropped 11.8% in the past three months compared with the industry’s 9.1% decline.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 9.9% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Hershey (HSY) Looks Promising on Pricing Actions & Innovations
The Hershey Company (HSY - Free Report) appears well positioned on robust pricing actions. The leading snacks company boosts a portfolio of solid brands courtesy of prudent buyouts. The company continues to invest in its brands and capabilities to drive growth.
These upsides fueled third-quarter 2023 results, with net sales and earnings surpassing the Zacks Consensus Estimate and increasing year over year. Impressively, Hershey expects net sales growth of nearly 8% in 2023. Adjusted earnings per share (EPS) is envisioned to increase 11-12% to the $9.46-$9.54 band in 2023.
Let’s delve deeper.
Pricing Strategies Fuels Growth
Hershey has been undertaking strategic pricing initiatives to improve its performance. The trend continued in the third quarter of 2023 with solid top-line growth and improved margins. Quarterly organic sales on a constant-currency (cc) basis increased 10.7%, fueled by price realization. In the North America Confectionery segment, price realization contributed 11 points of growth. Management expects pricing to have a high-single-digit benefit for the segment during the fourth quarter. The North America Salty Snacks segment’s net sales increased 25.5%, courtesy of favorable price realization and volumes.
Image Source: Zacks Investment Research
Strategic Buyouts & Innovations Aid
The Zacks Rank #3 (Hold) company is undertaking buyouts to augment portfolio strength and boost revenues. In April 2023, the company signed an agreement to acquire two production facilities from Weaver Popcorn Manufacturing — a well-known leader in popcorn production and co-packing and a co-manufacturer of Hershey’s SkinnyPop brand.
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. Dot’s Pretzels remained strong in the third quarter of 2023, fueled by solid category growth and share gains in measured and non-measured channels. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition expands its snacking and production capabilities.
Hershey markets some of the world’s leading brands, which enjoy widespread consumer acceptance. The company is a global leader in sugar confectionery products, which is an attractive category as confectionery products are readily available, affordable and highly indulgent, thus making the industry almost recession-resistant. Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. In its last earnings call, management highlighted that it has a robust pipeline of innovations for 2024. It is committed to supporting brands through solid media marketing.
High Costs Stay
Hershey has been grappling with higher selling, marketing and administrative expenses for a while. In the third quarter of 2023, the company’s SG&A expenses rose 13.1% on increased levels of media and capability investments. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased by 9.9% due to wage and benefits inflation, capability and technology investments.
In the fourth quarter, management expects advertising spending to grow double-digit as it continues to support the sell-through of seasonal items and starts to reactivate the Salty Snacks brands post-ERP transition. The company expects non-advertising SG&A spending to rise in low-single-digits, reflecting some increase in technology and capability investments.
That being said, we believe that HSY’s pricing actions, coupled with other upsides, are likely to keep its growth story going.
HSY’s stock has dropped 11.8% in the past three months compared with the industry’s 9.1% decline.
3 Appetizing Food Picks
Lamb Weston (LW - Free Report) , which offers frozen potato products, sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 46.2% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 9.9% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.