Hershey (HSY) To Report Q4 Earnings: Key Factors To Note

The Hershey Company (NYSE:HSY) is slated to report fourth-quarter 2019 results on Jan 30. This renowned chocolate manufacturer’s earnings came in line with the Zacks Consensus Estimate in the last reported quarter. Also, it has a positive earnings surprise of 4.4%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has been stable at $1.23 per share over the past 30 days. This suggests a decline of 2.4% from the year-ago period’s reported figure. Nonetheless, the consensus mark for revenues stands at $2,066 million, indicating a rise of 3.9% from the figure reported in the year-ago period.

The Zacks Consensus Estimate for 2019 earnings per share stands at $5.73 per share, suggesting a rise of 6.9% from the year-ago period’s reported figure. The consensus mark for revenues stands at $6.12 billion, indicating a rise of 6.9% from the figure reported in the year-ago period.

Key Factors to Note

Hershey has been benefiting from constant innovation and product launches to address the evolving consumer demand. In this respect, Hershey's Gold and Reese's Outrageous (launched in 2018) have been doing well. Further, the launch of Reese's Thins is drawing customers’ attention, while the launch of the Kisses brand in India has been reaping benefits. Clearly, Hershey’s core brands have been growing strongly on the back of advertising investments, in-store merchandising and innovation.

Further, buyouts have been augmenting Hershey’s top line. To this end, the acquisition of Pirate Brands has been bolstering the company’s snacks business. Also, the company has been gaining from Amplify Snack Brands, which was acquired in January 2018. Notably, the net impact from buyouts and divestitures boosted sales growth by 1.2 points during the third quarter of 2019. In its last earnings call, management stated that Hershey’s top line in 2019 is likely to reflect a net positive impact of about 1 point from buyouts and divestitures.

Management expects a 2.5% rise in net sales for 2019. However, we cannot ignore the risks related to volatile currency movements, which had an adverse impact of nearly 0.2 points on the company’s top line in the third quarter of 2019. Moreover, currency headwinds are anticipated to have had a slightly negative impact on net sales growth.

Apart from this, any rise in selling, marketing and administrative expenses is a concern, though Hershey’s efficient pricing strategy and Margin for Growth initiative bode well. Markedly, earnings per share for 2019 are envisioned in a range of $5.68-$5.74. This indicates a rise of 6-7% from the reported figure in 2018.

What the Zacks Model Unveils

Our proven model does not 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Hershey carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

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:

Darling Ingredients (NYSE:DAR) presently has an Earnings ESP of +6.38% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hostess Brands (NASDAQ:TWNK) currently has an Earnings ESP of +4.62% and a Zacks Rank #1.

Procter & Gamble (NYSE:PG) currently has an Earnings ESP of +2.19% and a Zacks Rank #2.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>