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The Hershey Company (NYSE:HSY), a stalwart in the American confectionery industry, finds itself at a crossroads as it navigates a complex landscape of market opportunities and economic challenges. With a market capitalization of $37.7 billion and an enterprise value of $42.1 billion, Hershey remains a significant player in the Americas Packaged Food & Food Retail sector. However, recent developments in the global commodities market and shifting consumer trends have brought both opportunities and obstacles for the iconic chocolate maker.
Financial Performance and Outlook
Hershey’s financial trajectory shows promise, with revenue projections indicating steady growth from $11,572.9 million in 2025 to $12,478.8 million by 2027. The company maintains strong financial health, earning a "Good" overall score from InvestingPro, with particularly high marks in profitability metrics. While analysts are optimistic about the company’s earnings per share (EPS) potential, InvestingPro Tips reveal that net income is expected to drop this year, though the company has maintained dividend payments for an impressive 55 consecutive years. This optimism is largely attributed to Hershey’s strong pricing power and anticipated market share improvements.
The company’s dividend yield is expected to see a modest increase, rising from 2.8% in 2024 to 3.1% in 2027, potentially appealing to income-focused investors. This dividend growth, coupled with projected earnings improvements, suggests a balanced approach to shareholder returns and reinvestment in the business.
Market Position and Product Portfolio
Hershey’s market position remains robust, with recent data indicating improvements in market share across key categories including seasonal products, sweets, and mints. These gains are supported by strategic shelf space expansions and increased focus on innovation and marketing efforts.
The company’s product portfolio continues to evolve, with new offerings like Shaq-a-licious and Jolly Rancher innovations driving growth through expanded distribution channels. This diversification strategy aims to capture new market segments while reinforcing Hershey’s core brand strength.
Challenges and Opportunities
Despite its strong market position, Hershey faces significant challenges, primarily in the form of cost pressures. The volatility in cocoa prices and the potential impact of tariffs have become key concerns for investors and analysts alike. Recent financial data from InvestingPro shows the company operates with a moderate level of debt and maintains healthy liquidity with a current ratio of 1.53, suggesting some flexibility in managing these cost pressures. InvestingPro subscribers have access to over 30 additional financial metrics and insights that can help evaluate Hershey’s ability to navigate these challenges. These external factors have the potential to squeeze margins if not effectively managed.
However, analysts note that many of these cost pressures are now largely accounted for in market expectations, potentially setting the stage for positive surprises if Hershey can navigate these challenges successfully. The company’s historically strong pricing power, tied to its iconic brand portfolio, is seen as a crucial asset in mitigating these cost pressures.
Pricing Strategy and Cost Management
Hershey’s recent pricing announcements have caught the attention of market observers, with analysts anticipating these moves to drive significant earnings growth in FY26. The company’s ability to implement price increases while maintaining market share underscores the strength of its brand and consumer loyalty.
Management’s focus on balancing pricing and productivity to offset external cost pressures demonstrates a proactive approach to maintaining profitability. However, the success of this strategy will depend on consumer acceptance of higher prices and the company’s ability to continue delivering value to its customers.
Consumer Trends and Market Dynamics
The confectionery market is experiencing a period of flux, with changing consumer preferences and value-seeking behavior influencing purchasing decisions. Despite these shifts, Hershey’s categories have shown resilience, with analysts noting that the broader snacking category pressures have not significantly impacted the company’s core products.
The solid consumer backdrop in Hershey’s key markets has supported better-than-expected elasticities, allowing the company to maintain volume while implementing price increases. This dynamic plays a crucial role in Hershey’s ability to navigate the current inflationary environment.
Innovation and Distribution
Hershey’s commitment to innovation remains a key driver of its growth strategy. The company’s focus on new product development and line extensions, such as the Shaq-a-licious range and Jolly Rancher innovations, demonstrates its ability to adapt to changing consumer preferences and create new market opportunities.
Distribution expansion for these new products is expected to continue driving growth, with the company leveraging its strong retail relationships to secure prime shelf space and visibility for its offerings.
Bear Case
How might rising cocoa prices and tariffs impact Hershey’s profitability?
The potential for increased cocoa prices and the imposition of tariffs pose significant threats to Hershey’s profit margins. As a key input in chocolate production, cocoa price volatility can have a direct impact on the company’s cost structure. The uncertainty surrounding tariff exemptions for cocoa imports adds another layer of complexity to Hershey’s cost management efforts.
If Hershey is unable to secure tariff exemptions or effectively pass on these increased costs to consumers, it could face margin compression and potentially lower earnings growth than currently projected. The company’s ability to navigate these cost pressures will be crucial in maintaining investor confidence and meeting financial targets.
Could changing consumer preferences affect Hershey’s market share?
While Hershey has shown resilience in its core categories, the broader trend of health-conscious consumers and shifting snacking preferences could pose a long-term challenge to the company’s market share. As consumers become more health-aware, there is a risk that traditional confectionery products may face reduced demand.
Additionally, the rise of value-seeking behavior among consumers could lead to increased competition from private label and lower-priced alternatives. If Hershey fails to adapt its product portfolio to meet these changing preferences or loses its premium positioning, it could result in market share erosion and impact the company’s growth trajectory.
Bull Case
How could Hershey’s pricing power drive future earnings growth?
Hershey’s strong brand equity and consumer loyalty provide it with significant pricing power, which could be a key driver of future earnings growth. The company’s recent pricing announcements are expected to contribute substantially to earnings growth in FY26, demonstrating its ability to pass on costs to consumers without significantly impacting demand.
This pricing power, combined with Hershey’s focus on productivity improvements, could allow the company to expand margins even in the face of rising input costs. If Hershey can continue to leverage its brand strength to implement strategic price increases while maintaining or growing market share, it could lead to sustained earnings growth and potentially exceed analyst expectations.
What potential does Hershey have for market share gains and innovation?
Hershey’s recent market share improvements in key categories suggest that the company has potential for further gains. The success of new product launches and the expansion of distribution for innovations like Shaq-a-licious and Jolly Rancher products indicate that Hershey is effectively tapping into new market segments and consumer preferences.
The company’s focus on innovation and marketing efforts could drive continued market share growth, particularly if Hershey can capitalize on emerging trends in snacking and confectionery. By successfully introducing new products and expanding into adjacent categories, Hershey could not only defend its current market position but also capture additional share from competitors and grow the overall category.
SWOT Analysis
Strengths:
- Strong brand portfolio with iconic products
- Significant pricing power
- Solid market share in key categories
- Effective innovation pipeline
Weaknesses:
- Dependency on volatile cocoa prices
- Potential vulnerability to tariffs on key inputs
- Exposure to changing consumer health trends
Opportunities:
- Market share gains in existing and new categories
- Expansion of distribution channels
- Leveraging brand strength for product extensions
- Potential for international growth
Threats:
- Rising input costs, particularly cocoa
- Potential implementation of tariffs
- Shifting consumer preferences towards healthier options
- Increased competition from private label and value brands
Analysts Targets
- Goldman Sachs: $222 (September 16th, 2025)
- Barclays: $165 (May 5th, 2025)
- RBC Capital Markets: $175 (May 2nd, 2025)
This analysis is based on information available up to September 17, 2025, and reflects the most recent analyst perspectives and market data provided. For the most comprehensive analysis of HSY’s investment potential, including detailed Fair Value calculations, financial health scores, and expert insights, visit InvestingPro. The platform offers exclusive access to over 100 additional metrics and professional-grade analysis tools, helping investors make more informed decisions about their HSY investment strategy.
InvestingPro: Smarter Decisions, Better Returns
Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on HSY. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore HSY’s full potential at InvestingPro.
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