Is Hershey (HSY) Poised to Beat Earnings Estimates? - Analyst Blog


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The Hershey Company ( HSY ) is set to report first-quarter 2014 results on Apr 24, before the market opens. Last quarter, the company delivered a positive earnings surprise of 1.18%. We note that Hershey has outperformed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 2.59%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Hershey had a strong 2013 buoyed by solid sales, margins, productivity gains and improved efficiencies from supply chain initiatives.

Hershey expects another year of top-line growth and margin expansion in 2014. Volume growth is expected to be driven by continued momentum in core brands, several product launches (in both the U.S. and international markets) and leverage the company's scale at retail. Further, Hershey plans to accelerate investments in international markets and expects solid growth from these markets in 2014.

However, in the first quarter, sales growth is expected to be hurt by tough year-ago comparisons which included strong distribution gains by Brookside. Brookside Foods Ltd. is a British Columbia-based private confectionary company which Hershey bought in 2012. Also, management expects low double-digit increase in selling, general & administrative costs in the first quarter which could pressurize margins.

Earnings Whispers?

Our proven model does not conclusively show that Hershey is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP:   The Earnings ESP is 0.00%.

Zacks Rank: Hershey has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

General Mills, Inc. ( GIS ) with Earnings ESP of +1.43% and a Zacks Rank #3.

The J.M. Smucker Co. ( SJM ) with Earnings ESP of +1.72% and a Zacks Rank #3.

The Cheesecake Factory Inc. ( CAKE ), with an Earnings ESP of +2.04% and a Zacks Rank #3.

CHEESECAKE FACT (CAKE): Free Stock Analysis Report

GENL MILLS (GIS): Free Stock Analysis Report

HERSHEY CO/THE (HSY): Free Stock Analysis Report

SMUCKER JM (SJM): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: CAKE , GIS , HSY , SJM

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