The Hershey Company
) reaffirmed its full-year 2013 guidance and long- term targets
for revenue and adjusted earnings per share at the 2013 Consumer
Analyst Group of Europe (CAGE) conference held in London.
2013 Earnings Outlook
The company maintained its outlook for net sales growth in the
range of 5%-7%. Volume growth in core brands in the U.S. and
internationally, driven by the increased investments in
advertising and go-to-market capabilities; increased innovation
in the form of Kit Kat Minis, Twizzlers Bites, Jolly Ranchers
Bites, Kisses Deluxe, Hershey's Mais and others; and introduction
of Brookside brand products in core retail channels in the U.S.
are expected to help Hershey achieve its sales targets. The
company also plans to expand its season's business in 2013.
Gross margins are expected to expand in 2013 by 180-200 basis
points, driven by input cost deflation, productivity gains and
The company maintained its adjusted earnings guidance in a range
of $3.56-$3.63, despite planned increases in advertising and
marketing costs. The adjusted earnings guidance represents
10%-12% year- over-year growth.
Higher investments in core brand marketing, regular product
innovation, productivity improvement and commodity cost deflation
are expected to help Hershey achieve its earnings targets despite
a challenging macroeconomic environment.
The company discussed several initiatives to drive growth over
the long term.
The company is bullish about its North America business and
intends to make further investments and expand its presence in
the region in order to drive growth. The company intends to
continue focusing on its core brands in the U.S.
Hershey is also keen on expanding its geographic footprint. The
company intends to drive its top-line growth further by focusing
on emerging countries with strong GDP and increasing consumer
spending power. Hershey intends to expand its five core brands of
Hershey's, Reese's, Hershey's Kisses, Jolly Rancher and Ice
Breakers in these markets.
The company believes that net sales outside the U.S. and
Canada will increase 15% to 20% in 2013, higher than 12% in 2012,
driven largely by innovation and increased advertising
investments for both core brands as well as new products. By the
end of 2014, the company intends to achieve $1 billion in net
sales in markets outside the U.S. and Canada. Over the long term,
Hershey's expects to expand its international revenues from 10%
to 25% of net sales.
Given the company's robust liquidity position, Hershey is
investing in marketing in order to drive revenue increase. In
fact, advertising is the most important component of brand
building. The company expects its advertising to be the same or
double its net sales growth. The company's brand investments give
it a competitive advantage and are one of the principal reasons
behind the company witnessing better volume elasticity versus its
The company reaffirmed its long-term outlook. Over the long term,
Hershey expects its organic sales to grow 5-7% and adjusted
earnings per share to increase 8-10%. The company aspires to
achieve $10 billion in net sales by the end of 2017 on the back
of strong organic growth and business development.
Hershey expects to generate operating cash flow, averaging
$900 million to $1 billion annually. In addition, the company is
targeting 50% dividend payout ratio. Capital spending is expected
to be slightly below 4% over the next several years, on an
(CAG): Get Free Report
FLOWERS FOODS (FLO): Free Stock Analysis
HERSHEY CO/THE (HSY): Free Stock Analysis
(JJSF): Get Free Report
To read this article on Zacks.com click here.
Hershey currently carries a Zacks Rank #3 (Hold).
Other companies in the sector that warrant investor attention
Flowers Foods, Inc.
J&J Snack Foods Corp.
ConAgra Foods, Inc.
). While Flowers Foods and J&J carry a Zacks Rank #1 (Strong
Buy), ConAgra carries a Zacks Rank #2 (Buy).