Hershey: Good Category, Resilient Growth, But Too Expensive
(Preview) Initiation of Coverage (HSY US) (Neutral)
Summary
Hershey is a market leader in U.S. confectionery and has growing businesses in U.S. salty snacks and outside the U.S.
It is a good business that has demonstrated resilience in sales and margins in the face of previous macro headwinds.
Hershey has set out new medium-term financial targets at an investor day, targeting an EPS CAGR of 7.5-9% in 2023-25.
Hershey has grown much faster in recent years in a successful turnaround, and we believe it will achieve the new targets.
At $259.87, shares have a 30.1x P/E and a 1.6% Dividend Yield. We expect a de-rating to 25x and a mid-single-digit annualized return.
Introduction
We review Hershey as a potential investment after management held an investor day on March 22 and set out financial targets both for 2024-25 and the long term.
We review Hershey as a potential investment after management held an investor day on March 22 and set out financial targets both for 2024-25 and the long term.
Hershey is the largest seller of quality chocolate in Nort…