Hershey (HSY) is in the perfect position to benefit from a rising tide that is lifting large cap, multinational stocks right now.
Why do I say that? As the bull market continues to charge ahead, and the S&P 500 reaches new highs almost daily, investors are enjoying a fantastic ride.
But this bull market is quite different from what we saw earlier this year. Back then, the surge was led by stocks in the financial sector. Now we’re seeing Wall Street rotate into large multinational stocks. The dollar has lost 15% to 30% against many major currencies since March, so any company that’s being paid in foreign currencies will likely see a nice earnings windfall.
Hershey is one stock that falls into that group.
Hershey has been in the chocolate biz since 1894, and it’s grown to be the largest chocolate company in North America. What I like about Hershey is that its brand name is recognized all over the world. That’s very important for any business, and it’s a crucial asset in an environment like this.
Two years ago, Hershey wasn’t doing so well, but the company has worked hard to turn itself around. The firm has cut costs by closing underperforming U.S. plants and outsourcing more work overseas. The business plan is clearing working.
In July, Hershey reported that its second-quarter profit leaped by 72%. The company earned $71.3 million, or 43 cents a share (excluding charges), up from $41.5 million in the year-ago period. Analysts were expecting earnings of 35 cents a share, so HSY posted a 23% earnings surprise. Results were helped by a 46% jump in second-quarter advertising revenue, as Hershey pumped money into promotions to give it a leg up over the competition.
Not only did the company beat estimates, but it raised its full-year growth outlook from 3% annual growth to 8%.
Hershey is due to report earnings again next Thursday, October 22. Wall Street sees earnings coming in at 67 cents a share. Personally, I would be shocked to see earnings less than 70 cents a share.
My advice is to get into Hershey before next week’s earnings report. I think we can see a 20% profit in this stock before the end of the year.
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