Yesterday, Hershey Co (HSY) announced that it is considering swapping high fructose corn syrup with sugar in some products. Herhsey has had a rocky year so far, could this move help boost sales going forward? Is now a good time to buy a piece of HSY stock?
Hershey – Company Profile
With a legacy that reaches back 118 years and a reputation for quality ingredients, Hershey remains the nation’s milk chocolate of choice. But it’s not just chocolate — Hershey sports dozens of candy brands, running the gamut from the coconut center of an Almond Joy to the white fudge shell of the Zero bar. Hershey has such a strong brand image that it is exceptionally resilient to competition.
In fact, Hershey’s commands 44% of the U.S. chocolate market and 31% of the total U.S. confectionery market. Although Hershey has a stranglehold on the U.S. candy market, it has done a great job with growth markets outside the U.S. Hershey is enjoying explosive growth in Mexico, Brazil, China and India, and it plans to reach $10 billion in sales in each of these nations within the next few years.
Hershey – Earnings Rundown
In the third quarter, Hershey stock fell short of analysts’ estimates. Hershey reported an adjusted earnings-per-share of $1.05, missing estimates of $1.04 per share. Hershey also lowered its adjusted EPS guidance for the year to between $4.01 and $4.03.
Looking ahead to the fourth quarter, analysts expect $1.07 EPS, slightly better than the third quarter. In addition to potentially switching to sugar, Hershey also recently launched a line of new products, including Brookside Crunchy Clusters, Reese’s Crunchy Cup and Reese’s Spreads. Hershey expects these new offerings to help boost sales.
Hershey’s business in China is another strong point, and Hershey expects to bring in $200 million in revenue for fiscal year 2014. Hershey also expects full-year 2014 net sales to increase by 4.75%.
Hershey – Current Ratings
Over the past 12 months, Hershey stock has slid from “buy” to “sell” territory. Hershey’s buying pressure has suffered. So, Hershey stock earns a “C” for its Quantitative Grade.
Hershey stock’s fundamentals do not fare much better. While HSY excels when it comes to return on equity, Hershey stock’s other rankings are rather unimpressive.
Earnings surprises earn a “D” while all other metrics earn mediocre “Cs” (sales growth, operating margin growth, earnings growth, earnings momentum, analyst earnings revisions and cash flow). Overall, Hershey stock earns a “C” for its Fundamental grade.
As of this posting, Dec. 4, I consider HSY a “C-rated hold.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
