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Investing.com - Piper Sandler has reiterated an Underweight rating and $120.00 price target on Hershey (NYSE:HSY) as the chocolate maker faces mounting pressure from tariffs and elevated cocoa prices. The company, currently valued at $33.8 billion, trades at a P/E ratio of 20.5x and maintains strong financial health according to InvestingPro analysis.
The investment firm noted that Hershey’s second-quarter U.S. measured retail sales growth looks promising, up 18.9% year-to-date, partly benefiting from Easter timing. This growth comes despite recent challenges, with InvestingPro data showing trailing twelve-month revenue at $10.8 billion and a revenue decline of 5.9%. Despite this positive sales trend, Piper Sandler has adjusted its earnings model to account for significant tariff impacts expected to begin in the third quarter of 2025.
Piper Sandler now includes approximately $100 million in quarterly tariff costs starting in Q3 2025, in addition to the previously acknowledged $15-20 million impact for Q2 2025. The firm indicated that tariff relief appears unlikely at this point, though it acknowledged that tariff situations can change rapidly.
The research firm has lowered its 2025 earnings per share estimate from $6.19 to $5.45, citing better top-line performance offset by tariff impacts. For 2026, the estimate was reduced more dramatically from $6.61 to $5.22, as Hershey now expects cocoa to remain inflationary into 2026.
Piper Sandler maintained its $120 price target but adjusted its valuation approach, now using approximately 23x calendar 2026 estimated earnings per share compared to its previous multiple of about 18x, reflecting that some of the earnings pressure stems from potentially fluid tariff situations.
In other recent news, The Hershey Company has faced a revision in its credit outlook by S&P Global Ratings, moving from stable to negative due to increasing leverage and weakening profitability. This change is largely attributed to high cocoa costs and ongoing acquisitions, including the planned $750 million purchase of LesserEvil. Despite these challenges, Hershey’s credit rating remains affirmed at ’A’ for issuer credit and ’A-1’ for short-term and commercial paper ratings. Piper Sandler has maintained an Underweight rating on Hershey, citing high cocoa futures costs and consumer price sensitivity as concerns, with a price target of $120. Meanwhile, DA Davidson has slightly increased its price target for Hershey to $163, maintaining a Neutral rating, noting the company’s better-than-expected volume performance. Stifel analysts have also maintained a Hold rating with a $160 target, highlighting Hershey’s first-quarter earnings per share of $2.09, which exceeded expectations. The company’s management has reaffirmed its 2025 guidance, anticipating an EPS decline due to significant cocoa inflation, but expects growth in the following year. At Hershey’s recent Annual Meeting, shareholders approved several key proposals, including the election of directors and the ratification of auditors, reflecting active shareholder engagement.
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