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On Friday, Piper Sandler, a well-known financial firm, downgraded Hershey shares from Neutral to Underweight, adjusting the confectioner’s price target to $120 from the previous $153. According to InvestingPro data, this target sits well below the current analyst consensus range of $134-$222, with the stock currently trading near its 52-week low of $147.60. The downgrade is primarily due to the firm’s expectations that the elevated cocoa costs, which are a key ingredient in Hershey’s products, will persist longer than initially anticipated, potentially squeezing the company’s earnings per share (EPS) in the coming years.
The analyst at Piper Sandler, Michael Lavery, expressed concerns about the impact of these sustained high cocoa prices on Hershey’s financial performance, especially looking ahead to 2026. Despite these challenges, InvestingPro data shows Hershey maintains strong fundamentals with a 44.46% gross profit margin and has demonstrated remarkable dividend reliability, maintaining payments for 54 consecutive years with a current yield of 3.6%. As a result, the firm has revised its EPS estimates for Hershey, lowering the 2025 forecast from $7.95 to $7.65, which still sits above the consensus estimate of $7.51. For 2026, the EPS estimate has been significantly reduced from $8.50 to $7.05, compared to the Street’s expectation of $8.07, which Piper Sandler believes is at considerable risk if current cocoa price levels continue.
Lavery noted that while their updated 2026 EPS estimates reflect an anticipation of moderation in futures costs, these decreases have not yet materialized. The enduring high costs of cocoa could add incremental pressure on Hershey’s EPS, leading Piper Sandler to apply a lower multiple of approximately 17.0 times the projected 2026 EPS to determine the new price target. This adjustment reflects the increased uncertainty regarding Hershey’s cost outlook.
The revised price target of $120 factors in this uncertainty and the potential for continued pressure on the company’s profitability. Hershey, listed on the New York Stock Exchange under (NYSE:HSY), will need to navigate these challenges as it moves forward in an environment of fluctuating commodity prices.
In other recent news, Hershey Co . has been the subject of several analyst updates. Deutsche Bank (ETR:DBKGn) has revised the company’s stock price target to $148, citing ongoing high cocoa prices as a potential strain on Hershey’s gross margins. Similarly, Piper Sandler and Citi analysts have also adjusted their outlook on Hershey’s shares due to increased cocoa cost risks.
Amid these concerns, Hershey’s CEO Michele Buck has announced her planned retirement by June 2026, adding another layer of complexity to the company’s outlook. Meanwhile, the company is also seeking regulatory approval to purchase over 90,000 metric tons of cocoa, a significant increase from current limits, in response to global cocoa shortages and escalating prices.
In another development, Swiss chocolate maker Barry Callebaut reported a decrease in sales volume, which has led to a negative watch for U.S. and European chocolate companies, including Hershey. These recent developments underline the challenges Hershey is facing, as noted by analysts from Deutsche Bank, Piper Sandler, and Citi.
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