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Hershey (HSY) Benefits From Effective Pricing & Buyouts
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The Hershey Company (HSY - Free Report) is reaping benefits from a favorable pricing environment. The leading snacks company undertakes strategic buyouts to enhance its portfolio. The company regularly brings innovation to its core brands. However, Hershey is not immune to a rising cost environment.
Let’s delve deeper.
What’s Working in Hershey’s Favor?
Hershey is undertaking strategic pricing initiatives to improve its performance. The trend continued in the fourth quarter of 2023, with net sales rising 0.2% and a 6.5-point increase in net prices. Robust pricing strategies protect the company’s margin performance. The adjusted gross margin came in at 44.2%, up 50 basis points (bps), on the back of net price realization and improvements in supply-chain productivity. Management expects year-over-year net sales growth of 2-3% for 2024, primarily driven by net price realization.
Image Source: Zacks Investment Research
The company is 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. Dot’s Pretzels remained strong in the fourth quarter of 2023, fueled by gains in distribution and velocity. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition further expands Hershey’s snacking and production capabilities.
Hershey markets some of the world’s leading brands, which enjoy widespread consumer acceptance. 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 is impressed with the launch of its latest innovation, Reese’s Caramel. The company has innovation, distribution and merchandising activations in the pipeline for 2024, courtesy of a surge in capacity. HSY’s technology and capacity investments in the brand bode well.
Hurdles on the Way
Hershey has been grappling with higher selling, marketing and administrative (SG&A) expenses for a while. In the fourth quarter of 2023, the company’s SG&A expenses rose 6.9% on increased levels of media, wage inflation and capability investments.
In its last earnings call, management highlighted that it expects gross profit dollars to decline low-single-digits and gross margin to contract by almost 200 bps in 2024. The downside was caused by high cocoa prices and elevated sugar costs, along with escalated labor inflation and unfavorable product mix.
All said, the company’s focus on cost-saving efforts, along with the upsides mentioned above, is likely to keep Hershey well-positioned for growth.
Shares of the Zacks Rank #3 (Hold) company have increased 2.4% in the past three months against the industry’s 0.6% decline.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 17.5% from the year-ago reported numbers.
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Hershey (HSY) Benefits From Effective Pricing & Buyouts
The Hershey Company (HSY - Free Report) is reaping benefits from a favorable pricing environment. The leading snacks company undertakes strategic buyouts to enhance its portfolio. The company regularly brings innovation to its core brands. However, Hershey is not immune to a rising cost environment.
Let’s delve deeper.
What’s Working in Hershey’s Favor?
Hershey is undertaking strategic pricing initiatives to improve its performance. The trend continued in the fourth quarter of 2023, with net sales rising 0.2% and a 6.5-point increase in net prices. Robust pricing strategies protect the company’s margin performance. The adjusted gross margin came in at 44.2%, up 50 basis points (bps), on the back of net price realization and improvements in supply-chain productivity. Management expects year-over-year net sales growth of 2-3% for 2024, primarily driven by net price realization.
Image Source: Zacks Investment Research
The company is 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. Dot’s Pretzels remained strong in the fourth quarter of 2023, fueled by gains in distribution and velocity. The company also purchased Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition further expands Hershey’s snacking and production capabilities.
Hershey markets some of the world’s leading brands, which enjoy widespread consumer acceptance. 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 is impressed with the launch of its latest innovation, Reese’s Caramel. The company has innovation, distribution and merchandising activations in the pipeline for 2024, courtesy of a surge in capacity. HSY’s technology and capacity investments in the brand bode well.
Hurdles on the Way
Hershey has been grappling with higher selling, marketing and administrative (SG&A) expenses for a while. In the fourth quarter of 2023, the company’s SG&A expenses rose 6.9% on increased levels of media, wage inflation and capability investments.
In its last earnings call, management highlighted that it expects gross profit dollars to decline low-single-digits and gross margin to contract by almost 200 bps in 2024. The downside was caused by high cocoa prices and elevated sugar costs, along with escalated labor inflation and unfavorable product mix.
All said, the company’s focus on cost-saving efforts, along with the upsides mentioned above, is likely to keep Hershey well-positioned for growth.
Shares of the Zacks Rank #3 (Hold) company have increased 2.4% in the past three months against the industry’s 0.6% decline.
Better-Ranked Staple Stocks
The Chef’s Warehouse (CHEF - Free Report) , which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 3.2%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 17.5% from the year-ago reported numbers.