2 Reasons to Buy Hershey Stock Like There's No Tomorrow

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Shareholders in Hershey (NYSE: HSY) are hoping for sweeter days ahead following a frustrating 2024. Underwhelming sales by the confectioner have pressured the stock, which is down about 12% over the past year and currently near a 52-week low.

Despite some bitter headline numbers, there are several reasons now could be a great time to pick up shares in a high-quality company that maintains solid fundamentals. Let's look at two of them.

1. It's ready to move past temporary headwinds

Hershey, with its signature chocolate, is a globally recognized consumer goods pioneer with a legacy spanning more than 125 years. What's less widely known is that the company also controls a broader portfolio of several other iconic chocolate and candy brands such as Reese's, KitKat, Jolly Rancher, and Twizzlers.

In recent years, Hershey has also made progress expanding into salty snacks by acquiring brands like SkinnyPop popcorn and Dot's Pretzels, which have emerged as key growth catalysts.

Ultimately, this diversified portfolio and leadership across several categories highlight the attraction of the stock. Beyond any near-term weakness, there is some confidence the company has plenty of room to grow worldwide with a positive long-term outlook.

Happy-looking person holding a chocolate bar.
Image source: Getty Images.

The challenges Hershey faced in 2024 reflected some macroeconomic headwinds for the broader packaged foods industry. Management has cited customers' pulling back on discretionary spending, a theme echoed by many other consumer staples companies. Retail shoppers have been more budget conscious as a response to higher pricing in recent years.

Hershey has been particularly exposed to historically high cocoa prices as a key raw-material cost, translating directly into a lower operating margin.

In the third quarter (ended Sept. 29), sales fell 1.4% while adjusted earnings per share (EPS) were 10% lower year over year.

These trends are disappointing, but a key takeaway is the general sense of stability in the overall business. The company is guiding for full-year 2024 sales that are flat relative to 2023, with a modest 6% decline in adjusted EPS.

Nevertheless, the company is optimistic for a return to growth alongside an expectation that cocoa pricing may normalize lower ahead of a projected global surplus in 2025. Efforts to improve supply chains and generate financial efficiencies mean Hershey could emerge stronger.

If the company gets back on track with improving operating and financial indicators over the next few quarters, it could mark the start of a sustained rally in its stock price.


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