2024-05-26 03:12:14 ET
Summary
- Hershey's price has declined by 22% since I wrote my bearish take, as its EPS outlook has stagnated as expected.
- In line with my expectations, the company's outlook is hampered by rising cocoa costs and other supply-side factors.
- Hershey's commodity input costs may continue to rise for years due to West African countries' growing economic, social, and political issues.
- Defying my expectations, consumption of candy and salty snacks has retained the "lockdown spike," implying candy may be akin to cigarettes in that demand rises during economic or social stress periods.
- My fair value target for HSY remains unchanged, but is close enough to its current price that my outlook is upgraded to neutral.
Last June, I published " Hershey: America's Lockdown Sugar Binge Is Unsustainable." At that time, I had a bearish outlook on Hershey ( HSY ) for various reasons. Its valuation was stretched after a strong bull market primarily driven by what I viewed as a temporary increase in candy demand during lockdowns. I also thought that rising commodity, labor, and freight costs would add extra pressure to its profit margins....
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Hershey: Cocoa Inflation Is Here To Stay, But That May Not Hurt Demand