Hershey (NYSE: HSY) reported earnings for the fourth quarter, and investors seemed to think they were rich and delicious. As I was writing this, shares were up 5%. Why were they up so high?
Well, earnings beat estimates. Hershey managed to deliver an adjusted $0.59 per share. Wall Street wanted $0.54, so there you go. Also, that was four pennies better than the previous year's performance. While that was good, it should be noted that Hershey had an overall problematic year, as it saw earnings per share decline a little under 10% to $1.88 per share. Currency changes are hampering sales growth, so Hershey will need to keep marketing activities as strong and efficient as possible. Margins are also being addressed, as management is hunkering down to wring out every conceivable saving in the supply chain.
I think the strength of the stock as of late is interesting. It looks like the whole peanut-butter-scare thing hasn't affected the performance of the shares (remember that Hershey makes Reese's Peanut Butter Cups), and that Wall Street doesn't think it's an issue (I can see that reasoning).
Still, I would imagine that some consumers are still afraid to buy any candy that has peanut butter in it (I know I am, as I mentioned previously), so Hershey will have to educate consumers wherever possible on the safety of its products (Hershey has issued a press release on the subject). Hopefully I'll get my courage back soon and can once again enjoy the occasional Reese's.
As for whether or not to buy the stock, I think, on a short-term basis, Hershey's run-up will need to be digested by the market, so I can't see establishing a position right now. Unless you are simply dollar-cost-averaging every month, I figure waiting for a pullback would be justified. Hershey did well in Q4, but I think it will have a difficult year ahead of it in terms of sales growth and managing the bottom line. Hopefully the confectioner is up to the challenge.
Disclosure: I don't own any company mentioned; positions can change without notice.
Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD)
So long peak oil, here comes peak uranium
Black Friday expected to be strong, no promises for Christmas
Reader Comments (Page 1 of 1)
1-27-2009 @ 8:19PM
jrbailey225 said...
Two year ago this company closed a plant in Riverbank California. It laid off about 600 people. The reason for the closing of the plant -- it was opening a new plant in Mexico. Have not bought a Hershey candy since. Is this not terrorism? They destroyed the live of 600 American for a little more profit. This shows the commitment of Hershey to the USA.
1-27-2009 @ 11:00PM
dmsm95363 said...
Chocolate from Mexico ~ no more Hereshey for me....disgusting corporate outsourcing to foreign countries. Just as soon NOT EVER have any candy or anything else that this company manufactures....gee, unions warned us in the late 1970's, but we were too busy to hear them.
1-28-2009 @ 2:15AM
Andre Sammartino said...
Perhaps Hershey's relative success is reflective of the much reported tendency of olks to nurse their devastated hip-pockets with chocolate in tough economic times?
See more here:
http://internationalbs.wordpress.com/2009/01/09/chocolate-is-still-sweet/
Cheers,
Andre