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Factors Setting the Tone for Hershey's (HSY) Q3 Earnings

Zacks Equity Research

The Hershey Company HSY is slated to release third-quarter 2019 results on Oct 24. This renowned chocolate producer has delivered positive earnings surprises in the last two quarters.

Let’s see what’s in store for the company this time around.

Hershey Company (The) Price and EPS Surprise

Hershey Company (The) Price and EPS Surprise

Hershey Company (The) price-eps-surprise | Hershey Company (The) Quote

What to Expect?

The Zacks Consensus Estimate for earnings in the third quarter has been stable over the past 30 days at $1.61, which suggests an increase of 3.9% from the year-ago period’s reported figure. The consensus mark for revenues is $2,124 million, indicating growth of 2.1% from the figure reported in the year-ago quarter.

Factors at Play

Hershey’s third-quarter performance is likely to reflect gains from buyouts. In this regard, the acquisition of Amplify Snacks Brands (concluded in January 2018) is likely to have contributed to Hershey’s top line. Also, contributions from Pirate Brands, which was purchased from B&G Foods last year, is expected to have augmented Hershey’s snacking business.

Apart from this, innovation is anticipated to have driven the top line in the quarter under review. Notably, Hershey regularly brings innovation to strengthen brand portfolio and cater to consumers’ demand. To this end, the company’s Reese’s brand has been doing particularly well — a trend that most likely continued in the third quarter, courtesy of solid demand for Reese’s Thins.  

However, Hershey grapples with high advertising and marketing costs. The company earlier stated that it expects advertising and consumer marketing costs to escalate in the second half of 2019 due to increased investments in core confection brands. We believe that this is likely to have reflected on Hershey’s margins in the quarter under review. Nonetheless, the company’s efficient pricing actions and saving plans (including its Margin for Growth program and SKU rationalization efforts) are expected to have countered the cost-related headwinds.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Hershey this season. The combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Hershey has a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Church & Dwight DG has an Earnings ESP of +0.93% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TreeHouse Foods THS has an Earnings ESP of +1.01% and a Zacks Rank #2.

Kimberly-Clark KMB has an Earnings ESP of +0.88% and a Zacks Rank #3.

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