Hershey Looks to Sweeten the Market With Its Fourth-Quarter Earningshttp://www.fool.com/investing/general/2014/01/27/hershey-looks-to-sweeten-the-market-with-its-fourt.aspx Joseph Solitro
January 27, 2014
Hershey (NYSE: HSY) is one of the most recognizable brands in the United States and its stock performed accordingly in 2013, with a rise of 34.63%, which widely outperformed the S&P 500's return of 29.69%. This great performance led to an analyst upgrade on Jan. 8, and it seems like the stock could put up a similar performance in 2014 for several reasons to be named shortly. Hershey is set to report earnings on Jan. 30, so let's take a look at these factors and see if we should initiate positions now or if we should wait to see what the report holds.
The king of chocolate
Last time out
Earnings per share grew 19.5% and revenue rose 6.1% year over year, driven by organic sales growth of 6.6%. Gross profit increased 15.2% to $855.55 million as Hershey's margin expanded an impressive 300 basis points to 46.2%. In the report, Hershey's management also reaffirmed the company's full-year outlook and cited core brand performance and new products as drivers for fourth-quarter growth. Overall, it was a great quarter and investors should ignore the narrow miss on revenue.
Expectations and what to watch for
These estimates would result in earnings per share growing 14.9% and revenue rising 8.6% year over year. On top of this growth, I also expect Hershey to report a rise in gross profit and a higher gross margin because of lower commodity costs, supply chain productivity, and cost savings initiatives, like we saw in the third quarter. Other than these key statistics, it will be important to look for updated information about the release of Lancaster Soft Cremes in the United States and the addition of the Jolly Rancher brand in India.
Lancaster is the first new brand to be introduced to the U.S. market by Hershey in 30 years, so investors are anxious to see what Hershey expects in terms of revenue for the year. With this said, the expansion of Jolly Ranchers into the Indian market could be even bigger; India has the second-largest population in the world, approximately 1.2 billion people, which means the revenue possibilities are through the roof. If Hershey reports solid earnings numbers and these two product launches succeed, the stock could be pushed much higher.
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