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Hershey Co - $HSY - Earnings Analysis: Strong brand recognition and market share in the confectionery and salty snack categories.

By sagebytes in Lifestyle —

Business Model

Hershey generates revenue through the sale of confectionery, salty snacks, and other food products across North America and internationally.

Revenue Sources

  • North America Confectionery: Sales of chocolate, sweets, mints, and gums in the United States and Canada.
  • North America Salty Snacks: Sales of salty snacks, including SkinnyPop popcorn and Dot's Homestyle Pretzels, in the United States and Canada.
  • International: Sales of confectionery and snack products in markets outside of North America, including Mexico, Brazil, India, and Europe.

Revenue Distribution by Channel

  • The company sells products through a variety of channels, including multi-outlet plus convenience stores (MULO+ w/ Convenience), club stores, drug stores, and e-commerce platforms. Performance varies across channel, so not all data available.

Income Statement Analysis

  • Net sales increased by 8.7% due to organic growth and the Sour Strips acquisition.
  • Operating profit increased significantly due to derivative mark-to-market gains and higher sales volume.
  • Net income attributable to The Hershey Company increased substantially due to the factors impacting operating profit.

Balance Sheet Analysis

  • Total assets increased due to growth in current assets, property, plant, and equipment.
  • Total liabilities increased, driven primarily by increases in short-term debt and current portion of long-term debt.
  • Total stockholders' equity increased due to net income earned during the year.

Capital Allocation

The company plans to allocate capital towards strategic initiatives, restructuring programs, and managing the impacts of commodity cost increases (cocoa), through pricing and productivity efficiences. Also, the company plans on cost saving initiatives.

Management Commentary

I am pleased to see the consumer response to our agile innovation, marketing and in-store execution as we end the year with momentum across our segments.

While we continue to expect the surge in cocoa prices to put significant pressure on 2025 earnings, we will focus on driving top-line and share momentum, executing our transformation and productivity programs, and positioning ourselves to deliver peer-leading performance over the long-term.

We will conduct a very robust search process led by a search committee on the board. Certainly, we will be recognizing and paying attention to the fast evolving industry and world that we are all living in and experiencing today and being very selective to bring on board somebody who has the right skills, experience, qualifications, and people focus to allow us to win during this environment.

I am absolutely 100% laser focused in the interim on delivering this '25 plan, continuing to execute our transformation and making sure I'm positioning the company for our next phase of growth.

Overall Sentiment: The overall sentiment is positive, with management focused on navigating challenges related to commodity costs while driving growth and executing strategic initiatives. With laser focus to transition next phase of growth in 2025.

Recommendation

Rating: Hold

Reason for Rating: Hold rating due to anticipated headwinds from rising cocoa prices in 2025, balanced against the company's strong market position and strategic initiatives.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/7/2025, 6:33:52 AM