The Hershey Company (NYSE: HSY) announced Q2 earnings on Thursday. Shareholders of the confection company should definitely appreciate the growth reported. Net sales increased almost 6%. On an adjusted basis, earnings per share went up a whopping 48% to 43 cents.
According to Earnings.com, analysts were expecting only 35 cents per share. Hershey's management went the extra distance on this one. Not only was the magnitude of the beat impressive, but as Reuters points out, Hershey raised its guidance for the full fiscal year, something that is obviously a positive signal to the marketplace.
As mentioned in the press release, the company really wanted to ensure a proper strategic position when it came to the core brands. Management significantly increased advertising expenditures to accomplish this goal. When it comes to consumer-products companies that are based on brand equity, I always want to see strong levels of marketing and promotions. I think Hershey made a wise choice in strengthening its advertising programs, and I believe the company should continue investments in this area. This is especially true during a recession. Money might be tight, but reminding consumers about the value of a particular portfolio through repeated brand exposure is nevertheless a worthwhile way to defend shareholder value.
I think Hershey had a good Q2, and I hope its next quarter is equally as effective, but I'm not inclined to buy the stock today. I don't think it would make a great trade quite frankly. However, if you already hold shares of Hershey, I don't see any reason why you can't still hold them. You certainly wouldn't sell on this earnings news.
Disclosure: I don't own any company mentioned; positions can change without notice.