Over the past 10 quarters,
The Hershey Company
) has beaten earnings estimates 6 times and matched 4 times. The
world-renowned chocolate maker has surpassed expectations in each
of the first 3 quarters of 2012, and will report again on January
28. In addition, this Zacks #2 Rank (Buy) pays a regular quarterly
dividend that yields 2.3%, which should grab the attention of
income seeking investors.
Solid Third Quarter Results
Hershey's third quarter earnings per share of 87 cents beat the
Zacks Consensus Estimate by 1.2% and eclipsed last year's
performance by 3.6%.
Net sales rose 7.5% from last year to $1.75 billion, driven by both
price and volume growth. Organic volume growth was driven largely
by new product launches, mainly in the U.S.
Hershey's adjusted gross margin for the quarter expanded 70 basis
points (bps) to 43.2%, as pricing and productivity benefits and
improved efficiencies from supply chain initiatives offset
headwinds from rising input costs.
Hershey's will report its fourth quarter results later this month.
The Zacks Consensus Estimate at the moment is 75 cents per share,
compared to 70 cents in the fourth quarter 2011.
Another Raised Guidance
Following the solid performance in the third quarter, Hershey
raised its 2012 earnings guidance to between $3.22 and $3.25 per
share, compared with the prior forecast of $3.17 to $3.23.
Accordingly, adjusted earnings per share are expected to grow 14%
to 15% year over year, versus the prior expectation of 12% to 14%.
The revenue growth guidance is now 8%-9%, instead of the previous
outlook of 7%-9%. Organic volume is expected to accelerate in the
fourth quarter due to the Halloween and Holiday season. Gross
margin guidance for 2012 also expanded due to lower cost inflation
The 2013 outlook is also encouraging, especially since there is no
cost inflation expected for the year. The company also raised its
long term targets in June last year following its continued
Increasing Dividend Payout
In addition to impressive earnings growth, Hershey pays a regular
quarterly dividend of 42 cents per share, representing an annual
dividend yield of 2.3%. The company has been hiking the payout
every year since 2010, including a 10.5% increase in October 2012
and a 10% increase in early 2012.
Rising Earnings Estimates
The Zacks Consensus Estimate for 2012 has increased 0.3% over the
last 90 days to $3.24 per share, implying year-over-year growth of
14.9%. For 2013, the Zacks Consensus Estimate rose 0.6% in the same
time frame to $3.59 per share, reflecting a year-over-year advance
Hershey currently trades at a forward price-to-equity (P/E) of
20.74x, a discount of 15% to the peer group average. On a
price-to-sales basis, the stock is trading in line with the peer
group average of 2.57x. Moreover, the company has a trailing
12-month return on equity (ROE) of 76.1%, which is significantly
above its peer group average of 7.4%. The long-term expected
earnings growth rate for the stock is 9.1%.
Shares of Hershey have been rising consistently since mid-April
2012, and reached a new 52-week high on December 18.
Moreover, the stock is currently trading above its 50- and 200-day
moving averages, which stand at $72.08 and $69.23, respectively. In
fact, the stock has been trading above its 50-day moving average
since the end of December 2012 and the 200-day moving average since
the end of November 2011.
Volume averages roughly 750K daily. The year-to-date return for the
stock is 3.10% compared with the S&P 500's return of 2.43%.
Founded in 1893 and based in Hershey, Pennsylvania, Hershey is one
of the largest U.S. confectionery companies and is well known for
chocolate products like Hershey's, Reese's, and Kisses, as well as
non-chocolate confectioneries such as Jolly Rancher candy, Ice
Breakers chewing gum, Breath Savers mints, and Bubble Yum bubble
gum. Currently, the company has a market cap of $16.44 billion.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
HERSHEY CO/THE (HSY): Free Stock Analysis
To read this article on Zacks.com click here.