Piper Sandler maintains Hershey stock underweight, $120 target

On Friday, Piper Sandler maintained its Underweight rating on Hershey shares (NYSE:HSY), with a price target of $120.00, significantly below the current trading price of $157.34. The firm’s stance is influenced by the current high cost of cocoa futures, which shows no signs of decreasing. Piper Sandler points out that consumers are becoming more sensitive to price changes, which could impact the company’s sales volume. They also note demographic challenges, specifically mentioning that the primary consumer base for chocolate, which includes Baby Boomers, is aging. According to InvestingPro data, 14 analysts have recently revised their earnings expectations downward, with analyst targets ranging from $120 to $211.

The firm’s projected earnings per share (EPS) for Hershey in 2026 stand at $6.61, assuming a significant reduction in cocoa futures costs in the second half of 2026 along with substantial non-cocoa cost of goods sold (COGS) savings. However, Piper Sandler cautions that if current cocoa futures prices persist, the EPS could potentially be closer to approximately $5.50. This forecast does not factor in any potential tariff costs. For context, Hershey’s current trailing twelve-month EPS stands at $8.13, with the company maintaining a P/E ratio of 19.31.

Piper Sandler anticipates that Hershey may implement additional measures to counterbalance the financial strain from high cocoa prices, such as more aggressive pricing strategies or cost-cutting initiatives. Nevertheless, the firm warns that these actions could carry risks of their own. Additionally, they expect that the company’s earnings growth could be constrained, potentially leading to pressure on its stock multiple. This would be particularly true if growth is derived from a strained profit and loss statement rather than from robust organic growth. Despite these challenges, InvestingPro analysis shows Hershey maintains strong financial health with a ’GOOD’ overall rating, operating with moderate debt levels and liquid assets exceeding short-term obligations. The company has also maintained dividend payments for 55 consecutive years, demonstrating long-term financial stability.

In other recent news, The Hershey Company reported its first-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $2.09, compared to the forecasted $1.97. However, the company fell short on revenue, posting $2.81 billion against a forecast of $2.84 billion. Analysts from Stifel maintained a Hold rating on Hershey with a $160 price target, while DA Davidson raised the price target to $163, maintaining a Neutral rating. Despite the challenges, including significant cocoa inflation and tariff impacts, Hershey’s management remains optimistic about achieving EPS growth next year.

Bernstein also raised its price target for Hershey to $155, highlighting positive momentum in certain product segments like salty snacks and seasonal items. Meanwhile, Hershey’s shareholders approved key proposals at the recent Annual Meeting, including the ratification of Ernst & Young LLP as independent auditors and the election of directors. Hershey’s management continues to focus on navigating through market uncertainties, with strategic initiatives in pricing and product innovation expected to bolster future performance.

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