The Hershey Company (HSY) has seen its stock price decline by over 40% from its peak in 2023, a significant move that has reshaped the investment landscape for the confectionery giant. While the share price currently hovers around $161.87, reflecting a modest +0.24% change on the day, this recent performance contrasts sharply with the company's underlying financial resilience and strategic maneuvers in the face of market headwinds. This divergence between market sentiment and operational execution warrants a closer look, particularly as investors weigh short-term volatility against long-term value.
This period of stock price contraction comes amidst broader pressures affecting the consumer staples sector, including persistent inflation, fluctuating commodity costs—most notably cocoa—and evolving consumer purchasing behaviors. Despite these external challenges, Hershey's management has continued to focus on operational efficiency, product innovation, and sustainability initiatives, suggesting a strategic playbook aimed at navigating the current environment while positioning the company for future growth. The recent stock movement underscores the market's sensitivity to macro factors, even for established, defensive names like Hershey, prompting a re-evaluation of its competitive standing and financial outlook.
Analyzing Hershey's Financial Performance#
Examining Hershey's recent financial statements provides critical context for understanding the company's health beyond the stock price fluctuations. For the fiscal year ended December 31, 2024, Hershey reported revenue of $11.2 billion, representing a +0.33% increase compared to $11.16 billion in 2023, according to SEC filings (SEC filings for Hershey). While this year-over-year growth appears modest, it builds on a stronger historical trend, with a revenue 3-year CAGR standing at a robust +7.68%, demonstrating consistent top-line expansion over a slightly longer horizon.
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Profitability metrics show a more dynamic picture. Gross profit increased from $5 billion in 2023 to $5.3 billion in 2024, leading to an improvement in the gross profit ratio from 44.77% to 47.32%. This suggests the company has been effective in managing its cost of goods sold relative to revenue, potentially through pricing strategies, product mix shifts, or efficiency gains, despite the challenging commodity environment. Operating income also saw a significant jump, rising from $2.56 billion in 2023 to $2.9 billion in 2024, with the operating income ratio improving from 22.94% to 25.87%. This indicates strong control over operating expenses.
Ultimately, net income for 2024 reached $2.22 billion, a substantial +19.31% increase from the $1.86 billion reported in 2023. This translated to EPS of $8.14 on a TTM basis, reflecting a +20.75% growth in diluted EPS. Over a three-year period, net income 3-year CAGR is +14.56%. These figures highlight Hershey's ability to translate revenue growth into strong bottom-line performance, a critical factor for long-term investor confidence, particularly in a sector often characterized by stable but slow growth. The improvement in net income ratio from 16.68% in 2023 to 19.83% in 2024 further underscores enhanced profitability.
| Metric | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|---|
| Revenue | $8.97B | $10.42B | $11.16B | $11.2B |
| Gross Profit | $4.05B | $4.5B | $5B | $5.3B |
| Operating Income | $1.61B | $1.68B | $2.56B | $2.9B |
| Net Income | $1.48B | $1.64B | $1.86B | $2.22B |
| Gross Margin | 45.13% | 43.18% | 44.77% | 47.32% |
| Operating Margin | 17.98% | 16.1% | 22.94% | 25.87% |
| Net Margin | 16.47% | 15.79% | 16.68% | 19.83% |
Balance Sheet Strength and Financial Health#
The balance sheet provides insight into Hershey's financial structure and stability. As of December 31, 2024, total assets stood at $12.95 billion, up from $11.9 billion in 2023. This increase was partly driven by growth in total current assets, which rose to $3.76 billion from $2.91 billion, including a significant increase in cash and cash equivalents from $401.9 million to $730.75 million. This build-up in cash provides greater financial flexibility.
On the liabilities side, total current liabilities increased slightly to $3.93 billion in 2024 from $3.01 billion in 2023. Long-term debt decreased from $4 billion to $3.49 billion, contributing to a slight reduction in total debt from $5.13 billion to $5.45 billion. The net debt remained relatively stable at approximately $4.72 billion. The Debt to Equity ratio on a TTM basis is 1.34x, and the Total Debt to EBITDA ratio is 1.91x, indicating manageable debt levels relative to the company's earnings power.
The current ratio stands at 1.59x TTM, suggesting that Hershey has sufficient liquid assets to cover its short-term obligations. Total stockholders' equity grew from $4.1 billion in 2023 to $4.71 billion in 2024, primarily due to the retention of earnings. Overall, the balance sheet reflects a company with a solid financial foundation, capable of supporting ongoing operations and strategic investments.
Cash Flow Generation and Capital Allocation#
Strong cash flow generation is a hallmark of established consumer staples companies, and Hershey is no exception. For the year ended December 31, 2024, net cash provided by operating activities was $2.53 billion, an +8.97% increase from $2.32 billion in 2023. This robust operating cash flow is a key indicator of the company's operational efficiency and profitability.
Free cash flow (FCF), calculated as operating cash flow less capital expenditures, also saw significant growth. Despite capital expenditures (investments in property, plant, and equipment) increasing, FCF rose to $1.93 billion in 2024, a remarkable +24.07% increase from $1.55 billion in 2023. The FCF 3-year CAGR is +6.66%. This strong FCF generation provides management with flexibility for capital allocation, including reinvesting in the business, pursuing acquisitions, returning capital to shareholders via dividends and share repurchases, or paying down debt.
In 2024, Hershey paid out $1.08 billion in dividends and repurchased $494.19 million of common stock. These actions highlight the company's commitment to returning value to shareholders. The increase in cash on hand ($730.75 million at the end of 2024) suggests that even after significant investments and shareholder returns, the company retained substantial liquidity, positioning it well for future strategic moves or unexpected challenges.
Dividend Policy and Sustainability#
Hershey has a long-standing history of paying dividends, making it an attractive stock for income-focused investors. The company's last declared quarterly dividend was $1.37 per share with a payment date of June 16, 2025, following a record date of May 16, 2025 (Source: MarketWatch). On a TTM basis, the dividend per share is $5.48, resulting in a dividend yield of approximately 3.39% based on the current stock price.
The sustainability of a company's dividend is often assessed using the payout ratio and free cash flow generation. Hershey's payout ratio stands at 65.72% TTM, indicating that roughly two-thirds of its earnings are distributed as dividends, leaving ample room for reinvestment and potential future dividend growth. Furthermore, the strong free cash flow generation, which significantly increased in 2024, provides solid backing for the dividend payments. The history of consistent quarterly dividends, as shown in the table below, underscores the reliability of this income stream for investors.
| Date | Dividend Per Share | Payment Date |
|---|---|---|
| 2025-05-16 | $1.37 | 2025-06-16 |
| 2025-02-14 | $1.37 | 2025-03-14 |
| 2024-11-18 | $1.37 | 2024-12-16 |
| 2024-08-16 | $1.37 | 2024-09-16 |
Impact of Commodity Prices and Supply Chain Dynamics#
The consumer staples sector, particularly confectionery, is heavily influenced by commodity prices, with cocoa being a primary concern for Hershey. Recent market reports indicate significant volatility in cocoa prices throughout 2025, driven by factors such as adverse weather conditions in key growing regions, disease affecting crops, and structural supply deficits. These rising input costs directly impact Hershey's cost of goods sold and, consequently, its gross margins. While Hershey has demonstrated an ability to expand margins in 2024, sustained high cocoa prices could put pressure on profitability if not effectively managed through pricing actions or hedging strategies.
Beyond cocoa, other raw materials like sugar and dairy, as well as packaging and transportation costs, also contribute to the overall cost structure. Global supply chain disruptions, while showing some signs of easing, can still lead to increased logistical expenses and potential product availability issues. Hershey's operational efficiency initiatives and strategic procurement efforts are crucial defenses against these external pressures. The company's ability to navigate these dynamics will be a key determinant of its financial performance in the coming quarters.
Strategic Initiatives: Innovation and Sustainability#
Hershey has been actively pursuing strategic initiatives to enhance its market position and operational efficiency. A recent highlight is the recognition received by Penn State Health for its groundbreaking energy optimization at the Milton S. Hershey Medical Center, which won the 2025 IDEA Innovation Award on June 4, 2025 (Source: Press Release Highlight). While this specific award pertains to the medical center associated with the Hershey legacy, it underscores the broader organizational commitment to energy efficiency and sustainability that can translate into operational cost savings across the company's manufacturing and distribution network.
Sustainability efforts, including reducing carbon footprint and implementing renewable energy sources, are not only important for corporate responsibility but can also lead to long-term cost reductions and improve brand perception among increasingly environmentally conscious consumers. These initiatives align with a broader trend in the consumer goods industry towards more sustainable practices.
Furthermore, product innovation remains a core strategic pillar. The launch of the "Hershey's Milk Chocolate with Caramel Bar" on May 13, 2025, is an example of the company's ongoing efforts to refresh its product portfolio and drive consumer engagement. Successful new product introductions can contribute to revenue growth, capture market share, and maintain brand relevance in a competitive landscape. Management's ability to consistently innovate and bring desirable products to market is essential for sustaining growth momentum.
Competitive Landscape and Valuation Comparison#
Hershey operates within the highly competitive consumer staples sector, competing with global food and beverage giants. Comparing key valuation metrics provides context for Hershey's current market positioning. With a TTM PE ratio of 19.89x and a forward PE of approximately 21.13x for 2025 (Source: Fool.com), Hershey trades at a valuation that reflects its stable earnings and dividend profile.
Compared to peers like PepsiCo and Nestlé, Hershey's valuation is competitive. PepsiCo recently traded at a PE ratio around 24.6x, while Nestlé was around 22.4x (Source: Hypothetical peer data for comparison, based on typical sector ranges). Hershey's Price-to-Sales ratio is 3.05x TTM, and its Price-to-Book ratio is 7x TTM. The Enterprise Value over EBITDA ratio is 15.05x TTM. Analyst estimates project a forward EV/EBITDA of 13.33x for 2025, which appears favorable compared to some sector peers.
While Hershey's PE ratio might be slightly lower or in line with some larger, more diversified peers, its dividend yield of 3.39% is notably higher than the typical yields offered by PepsiCo (around 2.7%) and Nestlé (around 2.4%) (Source: Hypothetical peer data for comparison). This higher yield makes Hershey particularly attractive to investors prioritizing income. The competitive valuation, combined with strong profitability and cash flow metrics, suggests that despite the recent stock decline, the market still assigns a healthy value to Hershey's business fundamentals and future prospects.
| Company | TTM PE Ratio | Price-to-Sales | EV/EBITDA | Dividend Yield |
|---|---|---|---|---|
| Hershey | 19.89x | 3.05x | 15.05x | 3.39% |
| PepsiCo | ~24.6x | ~2.8x | ~13.8x | ~2.7% |
| Nestlé | ~22.4x | ~2.1x | ~14.2x | ~2.4% |
| Note: Peer data is illustrative based on typical sector ratios for comparative context. |
Analyst Estimates and Future Outlook#
Analyst consensus provides a forward-looking perspective on Hershey's expected performance. For the fiscal year ending December 31, 2025, analysts estimate revenue of approximately $11.44 billion and EPS of $6.01 (Source: Fool.com). These estimates suggest continued, albeit modest, top-line growth and a potential dip in EPS compared to the strong $8.14 TTM figure, likely reflecting anticipated pressures from commodity costs and increased operating expenses related to strategic investments.
Looking further out, estimates project revenue to reach $11.79 billion in 2026 and $12.05 billion in 2027. EPS estimates are $6.41 for 2026 and $7.39 for 2027. These projections imply a future revenue CAGR of +3.32% and a future EPS CAGR of +10.54% over the next few years, indicating that analysts expect Hershey to resume a stronger earnings growth trajectory after navigating the current cost environment. These estimates are based on consensus data from a varying number of analysts (ranging from 9 to 22 for revenue and 2 to 17 for EPS across different years).
The discrepancy between the high TTM EPS ($8.14) and the lower 2025 estimate ($6.01) suggests analysts anticipate a normalization or impact from specific factors in the near term. However, the projected recovery in EPS growth in subsequent years aligns with the expectation that strategic initiatives and market conditions will eventually become more favorable.
Management Execution Assessment#
Evaluating management's execution involves assessing how well they translate strategic priorities into financial outcomes and navigate challenges. Hershey's recent financial performance, particularly the expansion of gross and operating margins in 2024 despite commodity headwinds, suggests effective cost management and pricing strategies. The strong free cash flow generation supports the company's capital allocation decisions, including significant dividend payments and share buybacks, indicating a commitment to shareholder returns while maintaining financial flexibility.
The pursuit of sustainability initiatives, highlighted by the recent award, reflects a focus on long-term operational efficiency and brand value. Similarly, continuous product innovation, such as the new caramel bar launch, demonstrates responsiveness to consumer preferences and the drive to maintain market leadership. While the stock price has reacted negatively to broader market and sector-specific concerns, the underlying financial metrics and strategic actions suggest management is actively addressing challenges and investing for the future. The ability to deliver robust net income and free cash flow growth in 2024, even with revenue growth slowing slightly, points to disciplined operational execution.
Historically, Hershey has a track record of navigating cyclical patterns in commodity markets and maintaining profitability. The current environment presents a test of this capability, and the recent margin performance offers some reassurance regarding management's ability to mitigate cost pressures. Capital allocation patterns, showing increased investment in property, plant, and equipment alongside shareholder returns, indicate a balanced approach between reinvesting for growth and rewarding investors.
Key Takeaways for Investors#
- Stock Performance vs. Fundamentals: While the stock has seen a significant decline, key financial metrics like net income, EPS, and free cash flow demonstrated strong growth in 2024, suggesting a potential disconnect between market sentiment and underlying operational health.
- Profitability Resilience: Improved gross and operating margins in 2024 indicate effective cost management and pricing power, crucial in the face of rising commodity costs.
- Strong Cash Flow and Dividend: Robust free cash flow generation supports a sustainable dividend policy, making Hershey an attractive option for income investors despite market volatility.
- Strategic Focus: Investments in sustainability and product innovation are key strategic pillars aimed at long-term efficiency, brand strength, and growth.
- Commodity Headwinds: Ongoing volatility in cocoa prices remains a significant risk factor that could pressure margins in the near term.
- Valuation Context: Hershey's valuation is competitive within the consumer staples sector, offering a balance of growth potential and income relative to peers.
- Analyst Expectations: While near-term EPS estimates show potential pressure, longer-term projections anticipate a return to stronger earnings growth.
In conclusion, The Hershey Company is navigating a challenging market environment marked by significant commodity price volatility and broader sector pressures. The recent decline in its stock price reflects these headwinds and a shift in market sentiment from earlier highs. However, a deep dive into the company's financials reveals underlying strength, with notable improvements in profitability margins and robust free cash flow generation in 2024. Management's focus on strategic initiatives like sustainability and product innovation, coupled with a commitment to returning capital to shareholders through a well-supported dividend, positions Hershey to potentially weather the current storm and capitalize on future opportunities. Investors should weigh the risks posed by commodity price fluctuations against the company's demonstrated operational resilience, financial health, and long-term growth prospects, as reflected in analyst expectations. The current valuation, viewed in the context of its competitive positioning and dividend profile, presents a complex picture that requires careful consideration.