Evercore ISI upgrades Hershey to Outperform amid positive outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 20 2024
0mins
Hershey Co (HSY) has seen a significant decline of 5.04%, hitting a 5-day low, as broader market indices like the Nasdaq-100 and S&P 500 show gains of 0.48% and 0.11%, respectively.
The recent upgrade from Evercore ISI to an Outperform rating reflects a positive outlook for Hershey, driven by anticipated steady pricing and significant cocoa relief expected in 2027. Analyst David Palmer's discussions with management suggest confidence in the confection category, projecting a 20% EPS growth for Hershey in 2027, supported by cocoa deflation. Evercore has set a price target of $255, indicating over 30% upside potential based on above-consensus earnings estimates.
This upgrade comes at a time when Hershey's stock has faced challenges, including a nearly 29% decline. However, the company's first-quarter organic sales growth of nearly 8% year-over-year and adjusted earnings rising 12% demonstrate resilience. The positive analyst outlook may help stabilize investor sentiment and support a recovery in the stock price.
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Analyst Views on HSY
Wall Street analysts forecast HSY stock price to rise
17 Analyst Rating
3 Buy
14 Hold
0 Sell
Hold
Current: 184.090
Low
181.00
Averages
196.27
High
222.00
Current: 184.090
Low
181.00
Averages
196.27
High
222.00
About HSY
The Hershey Company is a snacks company. The Company's segments include North America Confectionery, North America Salty Snacks and International. The North America Confectionery segment is responsible for its traditional chocolate and non-chocolate confectionery market position in the United States and Canada. This includes its business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines. This segment also includes its retail operations. The North America Salty Snacks segment is responsible for its salty snacking products in the United States. This includes ready-to-eat popcorn, baked and trans fat free snacks, pretzels and other snacks. The Company's portfolio includes chocolate and confectionery brands such as Hershey's, Reese's, Kisses, Kit Kat, Jolly Rancher, Ice Breakers, LesserEvil, Shaq-a-licious alongside salty snacks, including SkinnyPop and Dot's Homestyle Pretzels.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Hershey's Steady Growth: Hershey's stock has also declined by 29%, yet its first-quarter organic sales grew nearly 8% year-over-year, with adjusted earnings rising 12%, demonstrating the resilience of its brand portfolio and suggesting continued stable growth in the coming years.
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- Hershey's Brand Resilience: Hershey's stock has fallen 29% due to rising cocoa prices and the impact of weight-loss drugs on consumers, yet its brand portfolio remains robust, with organic sales growing nearly 8% year-over-year in Q1 and adjusted earnings up 12%, showcasing its sustained growth potential in the $146 billion global confectionery market.
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See More
Evercore ISI Upgrades Hershey to Outperform Rating
- Rating Upgrade: Evercore ISI has upgraded Hershey (HSY) from In Line to Outperform, reflecting a relatively compelling valuation following a nearly 20% pullback in the stock.
- Positive Market Outlook: Analyst David Palmer noted that recent discussions with management support a constructive view on the confection category, anticipating steady pricing and significant cocoa relief in 2027 if Hershey can stabilize its market share.
- Earnings Growth Expectations: Evercore projects a 20% EPS growth for Hershey in 2027, driven by significant cocoa deflation, with their 2026 and 2027 estimates slightly above consensus, indicating confidence in the company's recovery.
- Price Target Setting: Evercore ISI has set a price target of $255 for Hershey, representing over 30% upside potential, which corresponds to 25 times the firm's above-consensus 2027 EPS estimate, slightly above the midpoint of HSY's five-year valuation range.
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- Cocoa Price Decline: Following a nearly 70% drop in cocoa futures since 2024, chocolate manufacturers are reverting to traditional cocoa ingredients, which is expected to lower retail prices for consumers while reviving demand for cocoa farmers and improving their economic conditions.
- Hershey's Strategic Shift: U.S. confectionery maker Hershey (HSY.N) has announced plans to increase cocoa content in its chocolate alternatives and will revert to original recipes for Hershey's and Reese's products starting next year, demonstrating responsiveness to consumer feedback.
- Market Response and Sales Growth: As cocoa prices decline, Mondelez (MDLZ.O) has reduced some chocolate prices in Europe and is beginning to see a rise in sales volumes, indicating a recovery in market demand for traditional chocolate products.
- Legislative Push for Cocoa Return: Brazil recently enacted a law requiring products labeled as dark chocolate to contain at least 35% cocoa solids, which will align the country's chocolate market with higher cocoa content standards and further stimulate cocoa demand growth.
See More
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- Home Depot Investment Opportunity: Home Depot's shares are currently trading 29% below their previous high, and despite sales growth being pressured by high interest rates, its quarterly dividend of $2.33 per share yields 2.98%, significantly above the S&P 500 average, indicating strong investment value during economic recovery.
- Hershey's Steady Growth: Hershey's stock has also declined by 29%, yet its first-quarter organic sales grew nearly 8% year-over-year, with adjusted earnings rising 12%, demonstrating the resilience of its brand portfolio and suggesting continued stable growth in the coming years.
- Diageo's High Yield: Diageo offers a dividend yield of 3.88%, and although its stock is down 61% from its peak, its organic net sales increased by 0.3% year-over-year, showcasing the value of its diversified brand portfolio, with future potential to enhance free cash flow supporting dividend payments.
- Market Dynamics Analysis: While macroeconomic pressures have impacted consumer brand stock prices, the current low prices make these companies' dividend yields particularly attractive for income-seeking investors, especially in the context of an anticipated economic recovery.
See More
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- Home Depot Investment Opportunity: Home Depot's stock is currently 29% below its historical high, and despite sales growth being pressured by high interest rates, its quarterly dividend of $2.33 per share, equating to an annual yield of 2.98%, significantly exceeds the S&P 500 average, indicating strong investment potential as the economy rebounds.
- Hershey's Brand Resilience: Hershey's stock has fallen 29% due to rising cocoa prices and the impact of weight-loss drugs on consumers, yet its brand portfolio remains robust, with organic sales growing nearly 8% year-over-year in Q1 and adjusted earnings up 12%, showcasing its sustained growth potential in the $146 billion global confectionery market.
- Diageo's High Yield: Diageo offers a dividend yield of 3.88%, having paid out 91% of its free cash flow over the past year, but its strong portfolio in beer and spirits provides pricing power, with organic net sales increasing 0.3% year-over-year last quarter, highlighting the value of its diversified brand portfolio.
- Optimistic Market Outlook: With cocoa prices easing and Hershey's margins set to improve, its forward yield of 3% appears particularly attractive, while Diageo aims to boost free cash flow to $3 billion, indicating strong long-term potential for investing in these high-yield dividend stocks.
See More
Evercore ISI Upgrades Hershey to Outperform Rating
- Rating Upgrade: Evercore ISI has upgraded Hershey (HSY) from In Line to Outperform, reflecting a relatively compelling valuation following a nearly 20% pullback in the stock.
- Positive Market Outlook: Analyst David Palmer noted that recent discussions with management support a constructive view on the confection category, anticipating steady pricing and significant cocoa relief in 2027 if Hershey can stabilize its market share.
- Earnings Growth Expectations: Evercore projects a 20% EPS growth for Hershey in 2027, driven by significant cocoa deflation, with their 2026 and 2027 estimates slightly above consensus, indicating confidence in the company's recovery.
- Price Target Setting: Evercore ISI has set a price target of $255 for Hershey, representing over 30% upside potential, which corresponds to 25 times the firm's above-consensus 2027 EPS estimate, slightly above the midpoint of HSY's five-year valuation range.
See More
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- Strong Market Rally: Futures indicate an up day for Wall Street as the S&P 500 and Nasdaq hit record highs, driven by AI-related stocks like Micron, which surged 19% and surpassed a $1 trillion market cap, reflecting robust demand for AI chips.
- Micron's Continued Ascent: Micron's stock rose another 7% in premarket trading, achieving a remarkable increase from $500 billion to $1 trillion in just 48 days, the fastest on record, highlighting the ongoing shortage and insatiable demand for memory chips, suggesting significant future growth potential.
- SK Hynix Joins the $1 Trillion Club: South Korean memory giant SK Hynix also crossed the $1 trillion market cap threshold in today's trading, underscoring the strong growth in the global memory market and the increasing demand driven by the AI era.
- Upgrades for FedEx and Danaher: JPMorgan upgraded FedEx from hold to buy with a price target raised to $460, citing attractive risk/reward ahead of its freight unit separation; meanwhile, Citi reinstated Danaher with a buy rating and a $230 price target, reflecting optimism in the bioprocessing sector.
See More
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- Openlane Upgrade: JPMorgan upgraded Openlane from neutral to overweight and raised its December 2026 price target to $38, indicating that the online used car marketplace is experiencing robust growth and has potential for sustainable expansion over the coming years.
- Dollar General Downgrade: Deutsche Bank downgraded Dollar General from buy to hold, citing challenges in its customer base and the widening gap in the K-shaped economy, which may limit same-store sales upside, reflecting a cautious outlook on the company.
- Ecolab Upgrade: UBS upgraded Ecolab from neutral to buy and raised its price target to $325, demonstrating strong demand and positive performance expectations for the chemicals company amid a favorable market environment.
- FedEx Upgrade: JPMorgan upgraded FedEx from neutral to overweight, expressing optimism ahead of its upcoming earnings report, particularly regarding the separation of its freight business, which is seen as an attractive risk-reward opportunity.
See More
Chocolate Industry Returns to Cocoa Ingredients Amid Price Slump
- Cocoa Price Decline: Following a nearly 70% drop in cocoa futures since 2024, chocolate manufacturers are reverting to traditional cocoa ingredients, which is expected to lower retail prices for consumers while reviving demand for cocoa farmers and improving their economic conditions.
- Hershey's Strategic Shift: U.S. confectionery maker Hershey (HSY.N) has announced plans to increase cocoa content in its chocolate alternatives and will revert to original recipes for Hershey's and Reese's products starting next year, demonstrating responsiveness to consumer feedback.
- Market Response and Sales Growth: As cocoa prices decline, Mondelez (MDLZ.O) has reduced some chocolate prices in Europe and is beginning to see a rise in sales volumes, indicating a recovery in market demand for traditional chocolate products.
- Legislative Push for Cocoa Return: Brazil recently enacted a law requiring products labeled as dark chocolate to contain at least 35% cocoa solids, which will align the country's chocolate market with higher cocoa content standards and further stimulate cocoa demand growth.
See More
