The Hershey Company HSY has delivered fourth-quarter 2023 results, with the bottom line remaining flat year over year. While earnings beat the Zacks Consensus Estimate, revenues missed the same.
The company is navigating a challenging market, with a focus on innovation and consumer trends, despite facing cost pressures from high cocoa prices. It is optimistic about driving growth through marketing, innovation and brand investment. Additionally, Hershey is prioritizing productivity and transformation to enhance its long-term performance and maintain industry leadership.
Hershey Company (The) Price, Consensus and EPS Surprise
Hershey Company (The) price-consensus-eps-surprise-chart | Hershey Company (The) Quote
Quarter in Detail
Hershey has posted adjusted earnings of $2.02. The metric surpassed the Zacks Consensus Estimate of $1.95 and was flat year over year.
Consolidated net sales of $2,657.1 million rose 0.2% from the year-ago quarter. The metric missed the Zacks Consensus Estimate of $2,725 million. Organic sales on a constant-currency (cc) basis decreased 0.1%, as a 6.5-point increase in net prices was negated by lower volumes and intentional inventory reductions in the North America Salty Snacks category due to the implementation of an ERP system in the fourth quarter of 2023.
The adjusted gross margin came in at 44.2%, up 50 basis points (bps) year over year. This increase was primarily due to net price realization and improvements in supply-chain productivity, which compensated for the impacts of higher cocoa and sugar expenses, volume deleverage, and an unfavorable sales mix.
Selling, marketing and administrative expenses rose 6.9% year over year on increased levels of media, wage inflation and capability investments. Advertising and related consumer marketing expenses moved up 5.8%, with elevated investments in the United States. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased 7.3% due to wage and benefits inflation, capability, and technology investments. We expected selling, marketing and administrative expenses to increase 7% year over year in the quarter under review.
The adjusted operating profit of $544.2 million declined 2% year over year. The adjusted operating profit margin declined 40 bps to 20.5%. The downside can be attributed to higher investments in brand and capabilities, along with increased wages, which outweighed the benefits of price realization and productivity improvements. We expected the metric to decline 180 bps to 19.1%.
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Segment Details
The North America Confectionery segment’s net sales increased 2.1% year over year to $2,220.2 million. Organic net sales at cc also rose 2.1% due to net price realization, partly hurt by soft volumes. We expected segmental sales to increase 2.5% year over year to $2,228.2 million.
The company’s U.S. candy, mint and gum (“CMG”) retail takeaway for the 12-week ended Dec 31, 2023, rose 3.6% (in multi-outlet plus convenience store channels or MULO+C). CMG’s shares have declined about 38 bps as seasonal and refreshment share gains were offset by declines in everyday chocolate and sweets shares. The North America Confectionery segment’s income advanced 3% to $724.6 million.
The North America Salty Snacks segment’s net sales declined 24.6% from the year-ago quarter to $205.2 million.
Hershey's U.S. salty snack retail takeaway for the 12 weeks ended Dec 31, 2023, in MULO+C declined 7% year over year. The segment’s income decreased 81.7% year over year to $10.4 million.
Net sales in the International segment grew 12.7% year over year to $231.7 million. At cc, organic net sales increased 8.3% due to price realization and 2.3 points of volume growth. The segment’s income was $20.4 million, raised by $20.5 million from the year-ago period’s reported figure.
Other Financials & Guidance
HSY ended the quarter with cash and cash equivalents of $401.9 million, a long-term debt of $3,789.1 million, and a total shareholders’ equity of $4,099.1 million. Management expects capital expenditure of $600-$650 million for 2024, aimed at core confection capacity expansion and constant investments in digital infrastructure, including the build and upgrade of a new ERP system across the enterprise.
2024 Guidance
Management expects year-over-year net sales growth of 2-3% for 2024, primarily driven by net price realization. The company reported net sales of $11,165 million in 2023.
The company expects both adjusted and reported earnings per share (EPS) to be unchanged year over year in 2024. Notably, adjusted EPS was $9.59 in 2023 and the reported EPS was $9.06.
Management anticipates a reported and adjusted effective tax rate of 13%, and interest expenses of $165-$175 million.
The Zacks Rank #3 (Hold) stock has risen 3% in the past three months as compared to the industry’s growth of 2.4%.
Solid Staple Stocks
Some better-ranked stocks from the same sector are Lancaster Colony Corporation LANC, Treehouse Foods THS and Inter Parfums, Inc. IPAR.
Lancaster Colony is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC currently sports a Zacks Rank #1 (Strongly Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current fiscal-year earnings and sales indicates growth of 29.5% and 3%, respectively, from the fiscal 2023 reported figures. LANC has a negative trailing four-quarter average earnings surprise of 1%.
Treehouse Foods is a manufacturer of packaged foods and beverages. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year earnings indicates growth of 106% from the 2022 reported figures. THS has a trailing four-quarter average earnings surprise of 26.5%.
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year earnings and sales indicates growth of 20.2% and 21.7%, respectively, from the 2022 reported figures. IPAR has a trailing four-quarter average earnings surprise of 45.7%.
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