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Here's How Hershey (HSY) Looks Ahead of Q2 Earnings Release

The Hershey Company HSY is slated to release second-quarter 2020 results on Jul 23. This renowned chocolate company delivered a negative earnings surprise of 4.1% in the last reported quarter, though it outperformed the consensus mark in the preceding three quarters. Notably, Hershey has a trailing four-quarter earnings surprise of 2.5%, on average.  

The Zacks Consensus Estimate for earnings in the second quarter has gone down a penny to $1.15 per share over the past seven days. This suggests a decline of 12.2% from the figure reported in the year-ago period. The consensus mark for revenues stands at $1.75 billion, indicating a dip of 0.9% from the year-ago period’s reported figure.

Hershey Company The Price, Consensus and EPS Surprise

Hershey Company The Price, Consensus and EPS Surprise

Hershey Company The price-consensus-eps-surprise-chart | Hershey Company The Quote

Key Factors to Note

In its first-quarter earnings call, management said that it had temporarily closed retail locations, including its Chocolate World Store in Hershey, Pennsylvania; Times Square, New York; and Las Vegas. While these locations generate a small proportion of sales, continued closure is likely to have adversely impacted performance in the second quarter.

Apart from this, the company’s foodservice and travel retail businesses have been bearing the brunt of coronavirus-led disruptions. Management also highlighted that retail traffic and takeaways are suffering from social distancing.

Apart from this, Hershey has been seeing higher advertising and related consumer marketing expenses as well as a soft operating margin for the past few quarters now. A persistent rise in such expenses remains a threat. Nonetheless, Hershey’s robust pricing initiatives bode well. Also, the company’s Margin for Growth program is aimed at improving the operating margin through supply-chain optimization, streamlining the operating model and reducing administrative expenses.

Hershey has been benefiting from its focus on innovation, which has helped it bolster the portfolio. Also, it has been gaining from prudent buyouts, some of which have boosted its snacks category. Apart from this, Hershey has been undertaking efforts to enhance e-commerce capabilities. Over the past years, the company’s e-commerce growth has accelerated considerably, given the increased number of consumers buying groceries online. The company has witnessed similar trends in the confectionery category.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Hershey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hershey currently has a Zacks Rank #3 and an Earnings ESP of -0.44%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Procter & Gamble PG has an Earnings ESP of +0.37% and a Zacks Rank #2.

Kellogg K has an Earnings ESP of +1.08% and a Zacks Rank #3.

Colgate-Palmolive CL has an Earnings ESP of +0.75% and a Zacks Rank #3.

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