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) Q3 Earnings: Will Amplify Play a Strong Role?
Read MoreHide Full Article
The Hershey Company (HSY - Free Report) is slated to release third-quarter 2018 results on Oct 25. This renowned chocolate manufacturer delivered an average positive earnings surprise of 1.2% in the trailing four quarters. Let’s see what’s in store for the company this time around.
Hershey is likely to continue gaining from acquisitions like Amplify, which was a major sales driver in the second quarter of 2018. During the quarter, net sales of $1,751.6 million rose 5.3% year over year, backed by acquisitions, volumes and net price realization. Notably, North America net sales improved 5.6% to $1,560 million, largely fueled by Amplify’s acquisition. Hershey is committed toward investing in key brands, alongside enhancing capacities in the dynamic landscape. The company is also making efforts to keep pace with the evolving consumer trends.
Further, Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. In this respect, the company launched Hershey's Gold in an instant consumable pack and take-home packages. The same holds true for Reese's Outrageous. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs. Hershey’s consumer-driven efforts like endeavors to tap holiday opportunities, among others, are expected to be significant contributors to the company’s growth in the second half of 2018.
Efforts to Improve International Business
Hershey is making efforts to enhance its business in key markets like China, India, Brazil and Mexico, where consumer spending growth is positive. Hershey is slowly activating its five core brands in these markets. Constant currency net sales in Mexico, Brazil and India increased 15% and 12% in the second and first quarter of 2018, respectively. Among the emerging countries, the company’s special focus is on China.
The company plans to incorporate additional manufacturing capacity and resources to boost growth in the region. It started the implementation of the Margin for Growth Program in the second quarter of 2017 to optimize the manufacturing operations to support the China business. Management is impressed with the transformation of its international business, marked by strong organic growth and solid profit improvements in the second quarter, as well as strategic sale of Tyrrells and Golden Monkey businesses. These divestitures are likely to hit Hershey’s net sales to some extent in the coming days.
For the quarter under review, the consensus mark for International and Other sales stands at $222 million, down from $241 million reported in the year-ago period. The Zacks Consensus Estimate for North America sales is pegged at $1,865 million, reflecting year-over-year growth of 4.1%. The consensus mark for overall revenues stands at $2,087 million, up from $2,033 million recorded in the year-ago period.
Will Cost-Saving Efforts Help Offset Cost Woes?
Escalated costs remain a threat to Hershey. During the second quarter of 2018, adjusted gross margin shrunk 260 basis points (bps) due to escalated freight and logistics expenses, adverse mix, greater trade and packaging investments, and incremental plant expenses associated with new production lines. This apart, higher costs have been weighing on the company’s operating margins. Adjusted operating margin contracted 140 bps and 150 bps during the second and first quarters of 2018. Such cost-related pressures are likely to continue in 2018, which is a threat to profitability.
Nonetheless, Hershey is well on track with its Margin for Growth multi-year program. Per this initiative, Hershey will reduce its global workforce outside the United States by 15%. This is also intended to improve overall operating margin through supply-chain optimization, streamlined operating model and reduced administrative expenses. These moves are anticipated to boost efficiency, leverage global shared services and common processes, and increase capacity utilization.
Incidentally, the company expects savings from its ongoing Margin for Growth program in 2018 to come between $80 million and $90 million. Additionally, the company has undertaken strategic pricing initiatives to improve mix. Also, Hershey’s SKU rationalizing efforts have been progressing well as the company focuses on optimizing its portfolio. Such efforts are likely to help the company boost savings and overcome cost hurdles.
Markedly, the Zacks Consensus Estimate for the quarter under review has gone up by a notch over the past 30 days to $1.56 compared with $1.33 per share reported in the year-ago period.
What the Zacks Model Unveils
Our proven model doesn’t show that Hersheyis likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Hershey carries a Zacks Rank #3, its Earnings ESP of -0.94% makes surprise prediction difficult.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
Ralph Lauren Corporation (RL - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +0.23%.
PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.30% and a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Hershey (HSY) Q3 Earnings: Will Amplify Play a Strong Role?
The Hershey Company (HSY - Free Report) is slated to release third-quarter 2018 results on Oct 25. This renowned chocolate manufacturer delivered an average positive earnings surprise of 1.2% in the trailing four quarters. Let’s see what’s in store for the company this time around.
Hershey Company (The) Price and EPS Surprise
Hershey Company (The) Price and EPS Surprise | Hershey Company (The) Quote
Buyouts & Innovation — Major Drivers
Hershey is likely to continue gaining from acquisitions like Amplify, which was a major sales driver in the second quarter of 2018. During the quarter, net sales of $1,751.6 million rose 5.3% year over year, backed by acquisitions, volumes and net price realization. Notably, North America net sales improved 5.6% to $1,560 million, largely fueled by Amplify’s acquisition. Hershey is committed toward investing in key brands, alongside enhancing capacities in the dynamic landscape. The company is also making efforts to keep pace with the evolving consumer trends.
Further, Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. In this respect, the company launched Hershey's Gold in an instant consumable pack and take-home packages. The same holds true for Reese's Outrageous. An important strategy of the company is to create a unique and holistic portfolio for every season, which can meet consumers’ seasonal shopping needs. Hershey’s consumer-driven efforts like endeavors to tap holiday opportunities, among others, are expected to be significant contributors to the company’s growth in the second half of 2018.
Efforts to Improve International Business
Hershey is making efforts to enhance its business in key markets like China, India, Brazil and Mexico, where consumer spending growth is positive. Hershey is slowly activating its five core brands in these markets. Constant currency net sales in Mexico, Brazil and India increased 15% and 12% in the second and first quarter of 2018, respectively. Among the emerging countries, the company’s special focus is on China.
The company plans to incorporate additional manufacturing capacity and resources to boost growth in the region. It started the implementation of the Margin for Growth Program in the second quarter of 2017 to optimize the manufacturing operations to support the China business. Management is impressed with the transformation of its international business, marked by strong organic growth and solid profit improvements in the second quarter, as well as strategic sale of Tyrrells and Golden Monkey businesses. These divestitures are likely to hit Hershey’s net sales to some extent in the coming days.
For the quarter under review, the consensus mark for International and Other sales stands at $222 million, down from $241 million reported in the year-ago period. The Zacks Consensus Estimate for North America sales is pegged at $1,865 million, reflecting year-over-year growth of 4.1%. The consensus mark for overall revenues stands at $2,087 million, up from $2,033 million recorded in the year-ago period.
Will Cost-Saving Efforts Help Offset Cost Woes?
Escalated costs remain a threat to Hershey. During the second quarter of 2018, adjusted gross margin shrunk 260 basis points (bps) due to escalated freight and logistics expenses, adverse mix, greater trade and packaging investments, and incremental plant expenses associated with new production lines. This apart, higher costs have been weighing on the company’s operating margins. Adjusted operating margin contracted 140 bps and 150 bps during the second and first quarters of 2018. Such cost-related pressures are likely to continue in 2018, which is a threat to profitability.
Nonetheless, Hershey is well on track with its Margin for Growth multi-year program. Per this initiative, Hershey will reduce its global workforce outside the United States by 15%. This is also intended to improve overall operating margin through supply-chain optimization, streamlined operating model and reduced administrative expenses. These moves are anticipated to boost efficiency, leverage global shared services and common processes, and increase capacity utilization.
Incidentally, the company expects savings from its ongoing Margin for Growth program in 2018 to come between $80 million and $90 million. Additionally, the company has undertaken strategic pricing initiatives to improve mix. Also, Hershey’s SKU rationalizing efforts have been progressing well as the company focuses on optimizing its portfolio. Such efforts are likely to help the company boost savings and overcome cost hurdles.
Markedly, the Zacks Consensus Estimate for the quarter under review has gone up by a notch over the past 30 days to $1.56 compared with $1.33 per share reported in the year-ago period.
What the Zacks Model Unveils
Our proven model doesn’t show that Hersheyis likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Hershey carries a Zacks Rank #3, its Earnings ESP of -0.94% makes surprise prediction difficult.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
Lululemon Athletica Inc. (LULU - Free Report) , a Zacks #1 Ranked stock, has an Earnings ESP of +1.95%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren Corporation (RL - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +0.23%.
PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.30% and a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>