Will Hershey Bounce Back From Profit Pressures and Market Struggles?

The Hershey Company HSY, an industry-leading snacks firm, is facing mounting challenges, including historically high cocoa prices, weakening consumer demand and intensifying competition in key markets. Such challenges have led to a 6.1% drop in its share price in the past six months. The stock has underperformed its industry, the broader Zacks Consumer Staples sector and the S&P 500 in the said time frame. While the industry and the sector have declined 4.6% and 2.2%, respectively, the S&P 500 has gained 0.8%.HSY Stock's Past Six Month PerformanceImage Source: Zacks Investment ResearchWhat is Dragging the HSY Stock Down?Hershey is navigating a challenging environment caused by historically high cocoa prices and a financially stretched consumer base, which continues to pressure its results. Economic conditions have shifted consumer behavior toward value-seeking, with spending focused on essentials. This shift has reduced foot traffic to convenience and drug stores, where Hershey’s brands are heavily represented.The company is losing market share in the core everyday chocolate category, which is particularly concerning given its reliance on this segment. On its last earnings call, management highlighted that while take-home chocolate sales are improving, there is continued weakness in the convenience store (C-store) channel, a crucial driver for impulse purchases. Increased competition from smaller, more innovative brands is also contributing to Hershey’s market-share decline.Despite some improvement in its product variety portfolio, showing a three-point trend improvement from the third quarter to the fourth quarter of 2024, Hershey continues to struggle in the C-store segment. Sales remain soft due to macroeconomic pressures affecting consumer spending and impulse-driven buying patterns, keeping overall performance in this channel under pressure.Hershey Expects Profit Decline and Rising Competition in 2025Hershey's 2025 guidance reflects a growingly challenging environment. The company anticipates a mid-30% decline in adjusted earnings per share (EPS) compared to 2024 while reported EPS is projected to drop in the high-40% range.Management acknowledged that gross margin pressure will intensify in the second half of 2025 as hedge positions expire and higher-priced cocoa enters production. As a result, gross margins could decline more than 500 basis points, posing a significant profitability headwind.Additionally, competitive pressures are expected to escalate, particularly in Brazil and Mexico, where rivals are aggressively discounting and promoting products. Given these challenges, Hershey anticipates only low single-digit international growth in 2025.How the Zacks Consensus Estimate Stacks Up for HSYHSY is currently in a tough spot. The Zacks Consensus Estimate for EPS has seen downward revisions. In the past seven days, the consensus estimates for the current and the next fiscal year have decreased 21 cents to $6.11 and 4 cents to $6.50 per share, respectively. See the Zacks Earnings Calendar to stay ahead of market-making news.Image Source: Zacks Investment ResearchUnlocking HSY’s ValuationHershey’s forward 12-month price-to-earnings ratio is 30.12X, higher than the industry’s ratio of 24.32X. This indicates that investors may be paying a high price relative to the company's expected earnings growth.Image Source: Zacks Investment ResearchHSY’s Investment AnalysisThe above discussion raises concerns about HSY’s investment potential. The company faces significant challenges, including historically high cocoa prices, weakening consumer demand and intensifying competition in key markets. Given these headwinds, HSY may carry heightened investment risk at this time. Existing investors should evaluate whether to maintain or adjust their positions based on Hershey’s ability to navigate these short-term difficulties. HSY currently carries a Zacks Rank #5 (Strong Sell).Stocks to ConsiderPost Holdings, Inc. POST operates as a consumer-packaged goods holding company in the United States and internationally. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings indicates growth of 0.3% and 2.2%, respectively, from the prior-year reported levels. POST delivered a trailing four-quarter earnings surprise of 22.3%, on average.BRF S.A. BRFS raises, produces and slaughters poultry and pork for the processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It presently has a Zacks Rank #2. BRFS delivered a trailing four-quarter average earnings surprise of 9.6%.The Zacks Consensus Estimate for BRF's current financial-year sales and earnings indicates growth of 0.3% and 19.4%, respectively, from the year-ago reported figures. Tyson Foods, Inc. TSN operates as a food company worldwide. It currently has a Zacks Rank #2. TSN delivered a trailing four-quarter earnings surprise of 52%, on average.The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and earnings indicates growth of 0.9% and 23.6%, respectively, from the prior-year reported levels.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant 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 Hershey Company (The) (HSY): Free Stock Analysis Report Tyson Foods, Inc. (TSN): Free Stock Analysis Report BRF S.A. (BRFS): Free Stock Analysis Report Post Holdings, Inc. (POST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks