HSY Stock Down 11% in 3 Months: What Should Investors Do Next?

Zacks11-25

The Hershey Company HSY has faced challenges, with its stock dropping 11% over the past three months as it continues to be impacted by a more budget-conscious consumer base and historically high cocoa...

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During this period, HSY's stock has underperformed the broader industry, which saw a 7.6% decrease, as well as the Zacks Consumer Staples sector, which fell by 3.6%. In contrast, the S&P 500 saw a 6.2% increase over the same timeframe.Let's take a closer look at the key factors negatively impacting Hershey’s performance.Hershey’s Margins Under Pressure: Cost Concerns Persist. Recently, Hershey lowered its 2024 guidance, reflecting an increasingly challenging landscape. In light of current consumer and channel pressures, the company expects its sales to be nearly flat year over year, down from the previous forecast of around 2% growth. The adjustm","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0128526141.USD":"TEMPLETON GLOBAL SMALLER COMPANIES \"A\" ACC","BK4597":"股息贵族","BK4212":"包装食品与肉类","BK4532":"文艺复兴科技持仓","HSY":"好时","LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","GB00B4QBRK32.GBP":"FUNDSMITH EQUITY \"R\" (GBP) INC","LU1941712264.USD":"ALLIANZ PET AND ANIMAL WELLBEING \"A\" (USD) INC","LU1941712348.USD":"ALLIANZ PET AND ANIMAL WELLBEING \"AT\" (USD) ACC","BK4585":"ETF&股票定投概念","GB00B4LPDJ14.GBP":"FUNDSMITH EQUITY \"R\" (GBP) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4211":"区域性银行","SFM":"Sprouts Farmers Market Inc","LU0053671581.USD":"摩根大通美国小盘成长股 A(dist)","MKC":"味好美","BK4113":"食品零售","LU2355687059.USD":"NORDEA 1 GLOBAL IMPACT  \"BP\" (USD) ACC","BK4588":"碎股","FRPT":"Freshpet","LU2404859741.USD":"FUNDSMITH EQUITY FUND \"R\" (USD) INC","LU2404859667.USD":"FUNDSMITH EQUITY FUND \"R\" (USD) ACC","LU0029874061.USD":"TEMPLETON GLOBAL SMALLER COMPANIES \"A\" YDIS INC","LU0690374961.EUR":"FUNDSMITH EQUITY \"R\" (EUR) INC","ISBC":"投资者银行","LU0690374615.EUR":"FUNDSMITH EQUITY \"R\" (EUR) ACC","BK4504":"桥水持仓"},"translate_title":"HSY股价3个月下跌11%：投资者下一步应该做什么？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ISBC":1,"SFM":1,"HSY":1,"FRPT":1,"MKC":0.9},"content_text":"The Hershey Company HSY has faced challenges, with its stock dropping 11% over the past three months as it continues to be impacted by a more budget-conscious consumer base and historically high cocoa prices. During this period, HSY's stock has underperformed the broader industry, which saw a 7.6% decrease, as well as the Zacks Consumer Staples sector, which fell by 3.6%. In contrast, the S&P 500 saw a 6.2% increase over the same timeframe.Let's take a closer look at the key factors negatively impacting Hershey’s performance.\nWeak Consumer Trends Hurt HSY\nHershey is operating in a challenging environment, thanks to historically high cocoa prices and a stretched consumer base, which continues to pressure its results. Total snacking consumption softened in the third quarter of 2024 as people prioritized value and budgeted for meals. Consumer behavior has shifted toward value-seeking due to economic pressures, prioritizing budgets for essentials, which has reduced foot traffic to convenience and drug stores where Hershey’s brands are over indexed.In addition, shopping shifts to club, dollar and online channels — where the company’s products are less developed — are further complicating matters. Tighter inventory management by customers is impacting North America Confectionery and North America Salty Snacks. Hershey is also facing increased competition across all product segments.Thanks to these factors, the company’s third-quarter net sales declined 1.4%, with price increases partially offset by volume declines. This underperformance was driven by soft consumption trends, reduced retailer inventories and seasonal shipment delays. Quarterly adjusted earnings per share (EPS) fell 10% on lower sales and declining gross margins.\nImage Source: Zacks Investment Research\nHershey’s Margins Under Pressure: Cost Concerns Persist\nHershey is grappling with continued margin pressure, a trend that extended into the third quarter of 2024. The adjusted gross margin was 40.3%, which contracted 460 basis points (bps) on increased commodity costs, unfavorable timing of input costs, fixed cost deleverage and a negative mix. The adjusted operating profit of $654 million fell 13.2%, while the adjusted operating profit margin contracted 300 bps to 21.9% in the quarter.Management expects its 2024 adjusted gross margin to decline by nearly 250 bps. This projection reflects a combination of factors, including a reduced volume outlook, persistent channel and product mix challenges and the continued impact of inflation on key ingredients like cocoa and sugar. These pressures are expected to offset any benefits from price realization and supply chain productivity improvements.\nChallenging Road Ahead for HSY\nRecently, Hershey lowered its 2024 guidance, reflecting an increasingly challenging landscape. In light of current consumer and channel pressures, the company expects its sales to be nearly flat year over year, down from the previous forecast of around 2% growth. The adjustment to the sales outlook is driven by a weaker-than-expected third-quarter performance, ongoing competitive and consumer pressures and lower-than-anticipated retailer inventory levels in key categories such as confectionery and salty snacks.As a result of the reduced sales forecast, Hershey now projects its full-year adjusted EPS to decline by mid-single digits. This marks a revision from the earlier outlook, which anticipated only a slight decline in EPS.\nWhat Should HSY Investors Do Next?\nWith Hershey facing ongoing pressures from high commodity costs, shifting consumer trends, and tight retail inventories, investors should stay cautious as the company adjusts its 2024 forecast. While the company’s strong brand and market presence provides resilience, near-term growth challenges may impact returns. Potential investors should assess HSY’s ability to navigate these challenges and manage margin pressures before making investment decisions. At present, the company carries a Zacks Rank #5 (Strong Sell).\nDon’t Miss These Solid Bets\nSprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 15.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.2% and 29.6%, respectively, from the year-ago reported numbers.McCormick & Company MKC is a global food company that manufactures, markets and distributes spices, condiments, seasoning mixes and other flavoring products. It currently carries a Zacks Rank #2 (Buy). MKC has a trailing four-quarter earnings surprise of 13.8%, on average. The Zacks Consensus Estimate for McCormick & Company’s current financial-year sales and earnings suggests growth of around 0.6% and 8.2%, respectively, from the year-ago reported numbers.Freshpet FRPT, which manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently carries a Zacks Rank #2. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average. The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 224.3%, respectively, from the year-ago reported numbers.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nHershey Company (The) (HSY) : Free Stock Analysis Report\nFreshpet, Inc. (FRPT) : Free Stock Analysis Report\nMcCormick & Company, Incorporated (MKC) : Free Stock Analysis Report\nSprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486038396"}