What happened
Shares of The Hershey Company (HSY -0.28%), a confectionery producer with a major foothold in the U.S. chocolate market and with a list of brands that includes Reese's, Kit Kat, and Kisses, among many others, jumped as high as 6.5% Thursday morning after the company released strong first-quarter results.
So what
Consolidated net sales increased 2.3% to $2.02 billion, higher than analysts' estimates of $2.00 billion. Constant currency net sales posted 2.8% growth, and adjusted earnings per share increased 12.8% to $1.59, which was well ahead of analysts' estimates calling for $1.46 per share. For the full-year 2019, management expects net sales to increase between 1% and 3%, and for adjusted earnings per share to increase between 5% and 7% to a range of $5.63 to $5.74 per share -- analysts' estimates are on the low end of that range at $5.64 per share.
Image source: Getty Images.
"Our year has gotten off to a strong start and we are on track to deliver our financial commitments," said Michele Buck, The Hershey Company president and chief executive officer, in a press release. "We remain committed to delivering balanced growth today, while making key investments in our brands, capabilities and people to take the business to the next level in the future."
Now what
The better-than-expected top line was a relief to investors who have been anticipating a potentially slower start to 2019 as the company implements price increases and as management continues to replace lower-performing products with higher-margin items within each of its brands -- a move that could result in stronger margins at the cost of slower volume initially. If management can continue to dominate the chocolate aisle while it improves margins through a culling of underperforming products, implements price increases, expands through acquisitions, and pulls back on international spending, 2019's results could be better than anticipated while paving the way for a stronger and more profitable 2020 and beyond.
