The Hershey Company reports increase in net sales and income, but pessimistic outlook

Chocolate makers the Hershey company reported its Q1 results for 2024 ahead of markets opening in the US today.

The results showed an uptick in sales, income and earnings per share, compared with both Q1 and Q4 of 2023.

The cocoa price

This likely reflected the fact that companies like Hershey and Mondelez (the maker of Cadbury’s, who reported results earlier this week), have now largely recovered from the historically high cocoa prices experienced earlier this year, and that this plus Easter chocolate sales provided a boost to profits, compared with Q4 earnings.

Read our analyst’s cocoa price technical analysis forecast

Profits up by over 20%

Operating profits also were up over 32%, at over $1 billion. The company said in its release that this increase was “driven by sales growth, price realization, productivity and derivative mark-to-market gains which more than offset commodity inflation, higher brand investment, business realignment activities and acquisition and integration-related costs.”

Net income up by over a third

Perhaps most notable was the company’s reported net income of $797.5 million (or $3.89 per share-diluted) which was a year-on-year increase of 36.5%.

Consolidated sales of $3.2 billion showed a year-on-year increase of almost 9%, while organic, constant currency net sales increased 8.6%.

EPS beats analyst expectations

The company also marginally lifted its EPS, with adjusted earnings per share-diluted at $3.07, an increase of 3.7% year-on-year, and significantly higher than Q4’s EPS of $2.02.

This was well above analysts’ expectations for earnings per share, which were around the $2.70 range.

2024 outlook disappoints

During the results, the company stuck to its initial forecast of 2024 figures – which involved disappointingly flat sales figures and zero increase to earnings.

This current guidance included 2% to 3% net sales growth for 2024, and 0% increase to both EPS growth and adjusted EPS growth.

This is unlikely to impress investors, but also will likely do no damage to Hershey’s stock price, as this was the previously communicated outlook as well and represents no massive shock to shareholders.

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