On January 7, we maintained a Neutral recommendation on
The Hershey Company
), following appraisal of its third quarter results.
Hershey's third quarter 2012 earnings of 87 cents per share
beat the Zacks Consensus Estimate by a penny. Also, earnings
increased 3.6% from the prior-year quarter, driven by revenue
growth and improved gross margins. Net sales rose 7.5% from
the prior-year quarter, driven both by price and volume
We are impressed by the company's outperformance in all the
three quarters of 2012. Moreover, the company upped its earnings
guidance for the third time this year, highlighting its
attractive earnings potential. The 2013 outlook is also
encouraging, especially the expectation of no cost inflation in
In fact, Hershey's has delivered positive earnings surprises
in all the three quarters of 2012. Moreover, following the
encouraging outlook for 2013, many analysts raised their
estimates for the year. Accordingly, the stock carries a Zacks #2
Moreover, the company's strong brand positioning, strategic
marketing investments in core brands, disciplined innovation and
consumer capabilities make it attractive.
However, Hershey's lack of presence outside U.S. keeps us on
the sidelines. More than 80% of the company's business is
generated in the U.S. In 2011, only around 15% of the company's
net sales were generated outside U.S. The company is accelerating
investments in overseas markets, particularly in Mexico, Brazil,
India and China. However, competitors like
) have a significantly stronger presence outside North
Other Stocks to Consider
Besides Hershey's, other stocks in the retail food sector that
are currently performing well include
General Mills, Inc.
). Both the companies carry Zacks #2 Rank (Buy).
GENL MILLS (GIS): Free Stock Analysis Report
HERSHEY CO/THE (HSY): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
STARBUCKS CORP (SBUX): Free Stock Analysis
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