Piper Sandler Downgrades Hershey’s Bull Rating Due to Increasing Cocoa Costs
November 30, 2023
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The Hershey Company ($NYSE:HSY) is a leading producer of confectionary products and snacks that are enjoyed around the world. Recently, however, its stock has been downgraded to a lower rating by Piper Sandler due to increased cocoa prices. Cocoa is an essential ingredient in many of Hershey’s products, and as global cocoa prices have risen, it has become increasingly difficult for the company to maintain their competitive pricing. This news has caused some concern for Hershey’s investors, as the financial impact of increased cocoa prices on the company’s bottom line could be significant.
As a result, many are questioning what strategies Hershey will use to mitigate this risk and remain profitable. In the meantime, Hershey continues to pursue new innovation and marketing efforts, such as introducing new products or expanding their presence in existing markets, to further strengthen their position in the market.
Price History
The stock opened at $188.0 and closed at $185.7, representing a decline of 1.7% from its previous closing price of $189.0. Analysts at Piper Sandler cited the rising cost of cocoa as one of the main factors for the downgrade, noting that it could have a significant impact on the company’s bottom line. Additionally, they mentioned that analysts have become increasingly concerned about Hershey’s ability to manage its supply chain and distribution network in the face of increasing commodity costs. With cocoa prices expected to remain volatile in the near-term, investors are advised to keep a close eye on Hershey’s stock in the coming days. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Hershey Company. More…
| Total Revenues | Net Income | Net Margin |
| 11.16k | 1.91k | 18.9% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Hershey Company. More…
| Operations | Investing | Financing |
| 2.33k | -1.01k | -1.12k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Hershey Company. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 11.94k | 7.97k | 19.4 |
Key Ratios Snapshot
Some of the financial key ratios for Hershey Company are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 11.6% | 13.7% | 21.3% |
| FCF Margin | ROE | ROA |
| 14.6% | 38.7% | 12.4% |
Analysis
As a part of our analysis of HERSHEY COMPANY‘s wellbeing, we used our proprietary Star Chart to rate the company in terms of dividends, growth, and profitability. We found that HERSHEY COMPANY was strong in these categories, but slightly weak in terms of its assets. We also gave it a health score of 8/10, indicating that it is well-positioned to weather any type of crisis without risk of bankruptcy. We further classified HERSHEY COMPANY as a ‘gorilla’, a term we use to describe those companies that have achieved steady and high revenue or earning growth due to their strong competitive advantage. This classification may be of particular interest to investors looking for a company that is well-positioned to provide consistent returns. More…
Peers
The Hershey Co. is the largest chocolate manufacturer in North America and a leading competitor in the global chocolate market. With more than 80 years of experience in the chocolate industry, The Hershey Co. has a strong reputation for quality and innovation. The company’s main competitors are Kellogg Co, Nestle SA, Josef Manner & Comp AG.
– Kellogg Co ($NYSE:K)
Kellogg Co is a multinational food manufacturing company headquartered in Battle Creek, Michigan, United States. Kellogg’s produces cereal and convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods. The company’s products are marketed in over 180 countries.
– Nestle SA ($OTCPK:NSRGY)
Nestle is a Swiss food and beverage company with a market cap of 294.41 billion as of 2022. The company has a return on equity of 14.82% and is involved in the production and distribution of a wide range of food and beverage products, including baby food, bottled water, cereals, coffee, dairy products, and pet food. Nestle is one of the world’s largest food and beverage companies, with operations in over 190 countries.
– Josef Manner & Comp AG ($LTS:0F6A)
Joseph Manner & Company AG is a family-owned Austrian confectionery company headquartered in Vienna. It is one of the oldest companies in Austria, founded in 1860. The company produces a variety of chocolate and other confectionery products that are sold under the Manner and Mozart brand names.
Summary
Hershey Company has recently had its bull rating at Piper Sandler cut due to an increase in cocoa costs. This change in rating could be a concerning sign for investors, as the company may not be able to maintain their current performance in the face of rising input costs. In order to make an informed investment decision, potential investors should research more on Hershey’s current financial performance, their cost structure, and their competitive positioning in the market.
Additionally, investors should consider macroeconomic factors such as global cocoa prices and other price pressures, which can impact Hershey’s profitability. Overall, investors should be aware of the potential risks associated with investing in Hershey before making any decisions.
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