On Wednesday, JPMorgan (NYSE:JPM) maintained a Neutral stance on The Hershey Company (NYSE:HSY) with a set price target of $171.00, falling within the broader analyst range of $153-$222. Currently trading at $177.86, near its 52-week low, the stock has seen recent increases attributed to takeover speculation. According to InvestingPro analysis, the company maintains a GOOD financial health score, suggesting strong fundamental positioning despite market volatility. The analyst provided historical context, explaining that past attempts to acquire Hershey have been unsuccessful, largely due to the unique ownership structure and legal constraints that protect the company.
Hershey operates under a dual-class stock structure, which includes publicly traded Common Stock and non-public Class B Common Stock, primarily held by the Hershey Trust Company. This structure grants the Trust approximately 80% of the voting power, significantly influencing corporate decisions. The Trust, established to support the Milton Hershey School, benefits from dividends from Hershey's shares, which are a substantial funding source for the school.
Notably, InvestingPro data shows Hershey has maintained dividend payments for 54 consecutive years, with a current yield of 3.05% and impressive 14.93% dividend growth over the last twelve months.
Past acquisition attempts have faced substantial hurdles. In 2002, Wrigley, now part of Mars, encountered opposition from the local community, Pennsylvania state officials, and legal challenges initiated by the Attorney General at the time, Mike Fisher. The Hershey Trust Company ultimately rejected the offer, prioritizing the Milton Hershey School and local interests.
Additionally, during a strategic review in 2007 under then-CEO Rick Lenny, Hershey explored various growth options, including a potential sale or merger. Despite interest from other major confectionery companies, no formal bids were disclosed, and the review resulted in significant board changes at Hershey, influenced by the Trust's desire to maintain control.
The analyst refrained from commenting on the validity of the current takeover speculation but highlighted the historical challenges that have prevented Hershey from being acquired. The Pennsylvania law requires the Attorney General to be notified in advance of any transaction that could result in the Trust losing voting control, providing an additional layer of protection for the company's current ownership structure.
With a market capitalization of $35.97 billion and trading slightly below its InvestingPro Fair Value, Hershey presents an interesting case study for investors. For deeper insights into Hershey's valuation and 8 additional exclusive ProTips, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Hershey's financial performance and future expectations indicate a steady top-line growth of 2% to 4% for 2025, despite significant inflation impacts due to rising cocoa and sugar costs. The company is also facing increased pricing pressure in international markets, notably Mexico and Brazil, and is adapting its portfolio in response to consumer behavior changes influenced by GLP-1 drugs.
Piper Sandler has adjusted its price target on Hershey shares to $168 from $165, maintaining a Neutral rating, reflecting revised expectations for Hershey's performance through 2025 and 2026. The firm has also lowered its earnings per share estimates for Hershey from $8.65 to $8.15 for the year 2025 and from $9.45 to $9.35 for 2026.
In the light of new snacking occasions, Hershey has diversified its product portfolio by acquiring Sour Strips, a sour candy brand known for its bold flavors and strong social media following. The acquisition aligns with Hershey's strategy to diversify its sweets portfolio. Hershey is also expecting cost savings of around $180 million for 2025 from productivity and AAA programs.
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