Piper Sandler has maintained a Neutral stance on Hershey shares (NYSE: HSY), keeping the price target at $179.00. The firm adjusted its expectations based on several factors influencing the company's financial outlook.
Piper Sandler cited concerns over cocoa cost pressures and revised its earnings per share (EPS) estimate for 2024 from $9.45 to $9.35. The adjustment reflects a combination of factors, including a slower-than-anticipated momentum in confectionery sales and changes to selling, general, and administrative expenses (SG&A).
The investment firm also noted the potential for Hershey's underlying volume growth to accelerate through the first half of 2025, despite the fact that this may be overly optimistic given planned price increases in late 2024.
Moreover, Piper Sandler projected a decrease in third-quarter 2024 earnings, setting the EPS forecast at $2.51, down from the previous $2.91 estimate and below last year's $2.60. This projection contrasts with the consensus expectation of $2.75 for the same quarter.
Despite these revisions, Piper Sandler has left its 2025 EPS estimate unchanged at $8.88. The price target of $179 remains in place, which the firm notes is approximately 20 times the estimated 2025 earnings.
In other recent news, The Hershey Company (NYSE:HSY) has made significant developments. The company appointed Michael Del Pozzo as the new President of its U.S. Confection segment. Del Pozzo, with a wealth of experience from PepsiCo (NASDAQ:PEP), will replace Charles Raup and is expected to drive Hershey's growth initiatives within the United States. Hershey also plans to implement a workforce reduction as part of a broader trend of layoffs across various sectors.
In the financial analysis realm, Citi downgraded Hershey's stock from Neutral to Sell, adjusting the price target to $182 due to concerns over the company's gross margin in the coming year. Goldman Sachs (NYSE:GS) initiated coverage on Hershey with a Sell rating, citing potential downward estimate revisions due to ongoing losses in market share.
RBC Capital maintained its "Sector Perform" rating on Hershey, albeit reducing its price target from $209 to $205, reflecting concerns regarding volume and a mixed bottom-line outlook.
Hershey outlined its pricing strategy amid cocoa price volatility during its second quarter 2024 earnings call. The company plans a 6-7% price increase and has secured cocoa prices for 2024. Despite minor adjustments to its full-year guidance, Hershey anticipates a stronger second half of the year, driven by innovation and merchandising improvements.
InvestingPro Insights
In light of Piper Sandler's neutral stance and price target for Hershey (NYSE:HSY), real-time data from InvestingPro provides additional context for investors. Hershey's market capitalization stands at a robust $40.62 billion, and the company trades at a price-to-earnings (P/E) ratio of 22.22. This valuation is slightly higher when adjusted for the last twelve months as of Q2 2024, with a P/E ratio of 20.01. Despite a modest revenue growth of 1.44% during the same period, the company's revenue valuation multiple is considered high, which could signal caution for value-focused investors.
From the perspective of dividend investors, Hershey's commitment to shareholder returns is evident, as it has raised its dividend for 14 consecutive years and has maintained payments for 54 years, as noted in two InvestingPro Tips. The current dividend yield stands at 2.73%, complemented by a significant dividend growth of 32.24% over the last twelve months as of Q2 2024. Moreover, Hershey is predicted to be profitable this year, with analysts revising their earnings upwards for the upcoming period, suggesting confidence in the company's financial health.
Investors may also find the InvestingPro Tips highlighting that Hershey operates with a moderate level of debt and that its cash flows can sufficiently cover interest payments reassuring. However, the company is trading at a high price-to-book multiple of 10.13, which may warrant further scrutiny when assessing the stock's valuation. For those seeking more detailed analysis, there are additional InvestingPro Tips available, offering deeper insights into Hershey's financial metrics and investment potential.
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