An Investment in Hershey’s Stock Looks Sweeter Than Ever

Hershey’s (NYSE:HSYbecame an attractive investment last year when the COVID-driven sell-off resulted in ultra-low prices for this consumer staple. The company was not only well-positioned to weather the storm internal efforts to reposition the portfolio for longer-term sustainable growth were beginning to pay off. Over the past year, the company has finalized three major divestitures that have it in leaner shape, with a healthier balance sheet, and accelerating business.

Hershey’s, A Triple-Dip Of Good News

Hershey’s reported a very solid quarter despite headwinds related to divestitures and FX. Divestitures and FX resulted in a 0.2% and 0.4% headwind to the topline results with the takeaway being these headwinds are largely behind the company. That said, the $2.19 in reported consolidated revenue is 5.8% higher than last year and beat the consensus by 330 basis points. The gains were made on a 6.3% increase in organic sales due to a 5.75% increase in volume and a 0.6% increase in pricing. The U.S. segment was strongest with a bain of 9.06% while International saw its sales fall 13.1%.

Moving down the report, the company’s volume increase and internal efforts resulted in a significant increase in both the growth and operating margins. At the operating level, the GAAP margin increased by 470 basis points to 18.5% while the adjusted margin widened 170 basis points to 19.6% and both ahead of the consensus. The increase in revenue and margin resulted in earnings leverage and adjusted EPS of $1.49 or $0.06 better than expected.

“We delivered a strong quarter with continued share gains and volume growth to finish the year.   While the impact of key external factors on our business remains uncertain, we have good momentum going into 2021 with visibility into a strong start to the year.  We anticipate we will deliver another year of balanced sales and earnings growth in 2021,” said Michele Buck, The Hershey Company President, and Chief Executive Officer.

If the first dip of good news is the earnings beat, and the second the company’s increasing margins and earnings leverage, the third is the guidance. The company was among the first to reinstate guidance at the end of the calendar 3rd quarter 2020 and it has upped that guidance now. The company’s new projection has F2021 revenue growth in the range of 2-4% versus the previously expected 2.0% and a more robust 6-8% increase in EPS versus the $4.54 previously announced.

Hershey’s Dividend Is The Sprinkles On Top

If accelerating business, improving profitability, and earnings leverage aren’t enough to get you interested in Hershy there is also the dividend to consider. The company pays about 2.2% in yield with shares near $147 and there is a high expectation of future distribution increases. The company is paying about 48% of its earnings but that is based on a consensus figure well-below current guidance. The company’s earnings picture is backed up by a very healthy balance sheet as well, one that carries a moderate amount of cash and debt has good coverage and ample FCF. If the company follows true to form the next increase will come in later summer and could be worth as much as 10% of the current payout.

The Technical Outlook: Hershey’s Is Struggling With Resistance

Shares of Hershey’s popped on the news but resistance at the short-term moving average threatens to keep price action range-bound or moving lower. If price action cannot get above the 30 EMA a retest of the $144 level or lower becomes the most likely scenario. If, however, the bulls can rally and get above the EMA a move up to $152 or $153 looks probable.

By: Thomas Hughes

.

Gray Matrix on LinkedIn: Marketing & Broadcasts – AI & Chatbots – Talkk.ai http://www.linkedin.com – January 9[…] in/ecPBRqe #digitalmarketing #omnichannelmarketing #omnichannel #campaigns #talkk #brandambassador #consumerexperience Like Comment Share To view o […]N/A

Laurance Langdon, APMP on LinkedIn: Looking ahead: 2021 trends in retail automation and store supply chains http://www.linkedin.com – December 24, 2020[…] #supplychainsolutions #freightforwarder 2021, will see complete transformation of retail biz to #omnichannelmarketing with automation and outsourcing being key drivers […]0

Troy Singer on LinkedIn: Buffer http://www.linkedin.com – December 11, 2020[…] watching this short video? #digitaladvertising #digitalmarketingstrategy #digitalmarketingservices #omnichannelmarketing #directmail #directmailmarketing Digital marketing strategy vs […]N/A

Gus Calabro on LinkedIn: #StagnitoRetailMarketing #groceryindustry #supermarket http://www.linkedin.com – November 13, 2020[…] #foodindustry #supermarkets #grocery #grocery #investingstrategy #omnichannelretail #omnichannel #omnichannelmarketing Like Comment Share To view or add a comment, sign in To view or add a comment, sign in 15,06 […]N/A

Mark Pageau on LinkedIn: Cure Email Fatigue With Direct Mail http://www.linkedin.com – November 10, 2020[…] #omnichannelmarketing #ROI #effectivemessaging Like Comment Share To view or add a comment, sign in To view or add […]0

Oz Etzioni on LinkedIn: #personalizationeverywhere #adobecreativecloud #omnichannelmarketing http://www.linkedin.com – October 24, 2020[…] co #personalizationeverywhere #adobecreativecloud #omnichannelmarketing #creativetechnology Like Comment Share To view or add a comment, sign in To view or add a comment […]N/A

Eduard Perez-Mañanet Lozoya posted on LinkedIn http://www.linkedin.com – October 19, 2020An omnichannel strategy means providing your customers with a fully integrated shopping experience from the physical store to the virtual store, including mobile applications and the full range of possibilities offered by the offline and online world. #marketingconsultancy #digitalmarketing #optimizationstrategies #omnichannelmarketing Like Comment Share To view or add a comment, sign in To view or add a comment, sign in Editor’s Picks 2,174 followers 1,617 Posts 0 Articles View Profile FollowN/A

Oz Etzioni posted on LinkedIn http://www.linkedin.com – October 13, 2020[…] in/e49Ab3i #personalizationeverywhere #customerexperience #omnichannelmarketing Like Comment Share To view or add a comment, sign in To view or add a comment, sign in Editor’ […]0

Sid Nair posted on LinkedIn http://www.linkedin.com – September 23, 2020[…] #marketing #branding #seo #ppc #advertisingagency #customerdataplatform #customerexperience #omnichannelmarketing #servicelane #repurchase Like Comment Share Chris Puppos Vroom Vroom baby ! Like Reply 1 Like 3 […]N/A

“Discover How This Brand NEW Done for You Omnichannel Sales Funnel Automation System That Will Help You Dominate and Profit from Your Product, Service http://www.linkedin.com – September 20, 2020[…] #webinars2020 #salesfunnel #salesfunnels #entrepreneur #coachlife #onlinebusiness #onlinetrainings #omnichannelmarketing #marketingautomation #messengermarketing #emailmarketing #smsmarketing #founder #ceomindset […]3

DANIEL OGUNTIFA – Mktg Comm Expert posted on LinkedIn http://www.linkedin.com – September 3, 2020[…] you can monitor by yourself using technology, you have: Read More #customerexperience #directmail #omnichannelmarketing #seo #contentmarketing https://lnkd […]N/A

Omnichannel marketing strategy is the game-changer for every marketer! audienceprime.com – June 9, 2020[…]   Our topics of discussion for Omnichannelmarketing are: Firstly, what is Omnichannel? What is Omnichannel Marketing? What are the Omnichanne […]3

Top 5 FREE small business tools to find new market opportunities FAST! http://www.inspirehub.com – May 26, 2020[…] discovering more explicit resources and allies:  #differentiation, #competitivestrategies, #dtc, #omnichannelmarketing, #growyourbrand, #crisismanagement, #crisisleadership, #changemanagement and #businesscontinuity […]2

If you don’t have a Coffee Shop, how do you inspire retention? http://www.linkedin.com – February 25, 2020[…] – Keverne & Team KardZee #kardzee #clientretention #omnichannelmarketing #relationshipmarketing #personalizedstorytelling #loyaltymarketing #retention #storytellers2

LemmaDOOH on LinkedIn: Broadsign partners with Lemma to expand DOOH offering http://www.linkedin.com – December 19, 2019[…] #dooh #pdooh #digitaloutofhome #adsparc #lemma #lemmadooh #broadsign #omnichannel #omnichannelmarketing https://lnkd […]4

Affle launches Vizury Engage360 to simplify omnichannel marketing nrinews24x7.com – December 10, 2019[…] Yong, the Chief Architect & Technology Officer at Affle commented “Vizury Engage360is anAI-driven omnichannelmarketing platform thatoptimises the potential of each channeland deliversintegrated consumer experience […]1

Priyambada Mishra on LinkedIn: “This Monday’s marketing dose video covers pitching as part of your marketing strategy and sales plan. Even when you think you are not selling, you are pitching in one way or another. Like on networking events when simply being asked what you do. It is important to be consistent and positive in your pitching efforts without being perceived as talking just about yourself. I can help you with the right marketing strategy aligning sales plans with consistency to achieve the desired results in an effective way. #omnichannelmarketing #marketingtrends #marcomhacks #strategicstrength #exantedigital “ http://www.linkedin.com – October 28, 2019[…] #omnichannelmarketing #marketingtrends #marcomhacks #strategicstrength #exantedigital Share this post with your networ […]1

Planting Seeds http://www.linkedin.com – April 5, 2019[…] #PlantingSeeds #Gardening #Business #Building #Networking #Marketing #Advertising #Growing #Share #OmniChannelMarketing #Connections #Growth

Credit Suisse Bullish On Stocks In 2021 Because It’s Bullish On 2022

NEW YORK, NEW YORK – JULY 23: People walk along Broadway as they pass the Wall Street Charging Bull statue on July 23, 2020 in New York City. On Wednesday July 22, the market had its best day in 6 weeks. (Photo by Michael M. Santiago/Getty Images)

Credit Suisse analyst Jonathan Golub introduced his 2021 price target for the S&P 500 (^GSPC) of 4,050, implying 12.2% upside from Tuesday’s closing levels. Underpinning this upbeat call is his assumption that two years from now, the post-virus economic recovery will have already hit a peak.

“Our 2021 forecasts are designed to answer a simple question: what will the future (2022) look like in the future (end of 2021),” Golub said in a new note Wednesday. “From this perspective, we are forced to de-emphasize the near-term, focusing instead on the return to a more normal world.”

My Portfolio >All index data provided on a 15 minute delay.Powered by

“As we look toward 2022, the virus will be a fading memory, the economy robust, but decelerating, the yield curve steeper and volatility lower, and the rotation into cyclicals largely behind us,” he added.

Based on Golub’s analysis, economic activity as measured by GDP growth will renormalize at levels slightly above trend, or with quarterly annualized growth rates just over 3%, starting in the second half of 2021.

And the labor market — which as of October was still 10 million payrolls short of pre-pandemic levels — will likely reach “full employment” by the second half of 2022, Golub added.

Since the stock market discounts future events, each of these prospects for further improvement down the line should translate into a higher S&P 500 as investors price in these events.

Analysts have already begun to account for an anticipated improvement in corporate profits, as S&P 500 earnings per share (EPS) have on aggregate sharply topped consensus expectations so far for each of second and third quarter results this year.

“We expect 2020 estimates to rise, 2021 to remain stable and 2022 to moderate,” Golub said.

His 2021 S&P 500 price target of 4,050 is based on earnings per share of $168 next year, for an improvement of 20% over the expected aggregate EPS this year. He expects EPS will then rise to $190 in 2022.

Sector leadership

On a sector basis, Golub rates technology stocks as Overweight for 2021, given their “faster sales growth, superior margins, robust FCF [free cash flow], and low leverage. He also rated financials, one of the laggard sectors so far for the year-to-date, as Overweight, given their propensity to lead during recoveries.

“Consistent with a typical recovery, banks should benefit from improving credit conditions, increasing transaction volumes, and a steepening yield curve,” Golub said. “The group is adequately reserved, likely. resulting in a greater return of capital.”

Golub designated cyclicals with a Neutral rating for next year, saying he is “positively inclined toward economically-sensitive groups and believe[s] their momentum should persist over the near-term.” But he added that he thinks the largest quarter-over-quarter improvements in economic activity have already come and gone, leaving more tepid further upside potential for stocks with profits closely tethered to economic growth.

He rated non-cylicals like consumer staples as underweight, while giving health care specifically an Overweight rating.

“Non-cylicals should lag in an improving economy as falling volatility supports higher P/Es (price-earnings multiples) for riskier assets, and rising rates make their high dividend yields less appealing,” he said. “The one exception is health care, which should outperform given a more robust earnings trend.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Read more from Emily:

Find live stock market quotes and the latest business and finance news

For tutorials and information on investing and trading stocks, check out Cashay

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.Tags

More From Yahoo Finance:

.

.

CNBC Television

Credit Suisse’s Mandy Xu warns that investors are piling into value stocks at their own peril. With CNBC’s Melissa Lee and the Fast Money traders, Guy Adami, Tim Seymour, Karen Finerman and Steve Grasso. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2JdMwO7 » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC#CNBC#CNBC TV

%d bloggers like this: