Vending

Hershey boosts Q3 sales and earnings, beats market expectations

Logo provided.

November 6, 2020

The Hershey Co.'s consolidated net sales rose 4% from $2.13 billion in last year's third quarter to $2.22 billion in the third quarter ending Sept. 27, 2020, according to an earnings report. The impact of acquisitions and divestitures was a 0.8 point benefit driven by the acquisition of ONE Brands.

Net income rose from $325.3 million in 2019's third quarter to $447.3 million in 2020.

Net income per share rose from $1.59 to $2.21 for basic common stock, $1.54 to $2.14 for diluted common stock, and $$1.45 to $2.00 for basic Class B stock.

The company's 3.8% organic sales growth beat analyst expectations of 2.5%, according to Seeking Alpha. The company declared an 8.04-cent dividend payable Dec. 15 for shareholders of record Nov. 20.

Shares traded at $148.97 today against a 52-week range of $109.88-$161.83.

"We had a strong third quarter, with accelerated reported net sales growth of 4%, adjusted diluted EPS growth of more than 15% and confectionery share gains across markets, including an almost 190 basis point gain in the U.S.," Michele Buck, president and CEO, said in the release. "Our core U.S. business remains healthy as consumers reach for small treats during the pandemic, and our decision to lean into Halloween ahead of the season supported consumers' desire to find new and creative ways to celebrate safely."

Adjusted operating profit of $543.3 million increased 13.9% versus the third quarter of 2019. This resulted in an adjusted operating profit margin of 24.5%, an increase of 220 basis points versus the third quarter of 2019, driven by strong price realization in the North America segment and corporate and operational cost management.

Third-quarter 2020 operating profit of $611.4 million increased 32.7% versus the third quarter of 2019, resulting in an operating profit margin of 27.5%, an increase of 590 basis points. This increase was driven by higher gross profit due to higher derivative mark-to-market commodity gain in the current period.

Reported gross margin was 48.7% in the third quarter of 2020 compared to 44.2% in the third quarter of 2019, an increase of 450 basis points. The increase reflected a higher derivative mark-to-market commodity gain in the current period, along with net price realization. Adjusted gross margin was 45.4% in the third quarter of 2020 compared to 44.8% in the third quarter of 2019, an increase of 60 basis points driven by pricing gains which were partially offset by unfavorable commodities and increased warehouse costs related to elevated demand in North America.

Hershey's North America net sales were $2 billion in the third quarter of 2020, an increase of 6.3% versus the same period last year.

U.S. candy, mint and gum retail takeaway increased 6.5%, resulting in a category market share gain of 188 basis points. This gain was largely driven by strong sales of Hershey's chocolate brands, which increased 9.8% versus the prior year period.

Salty snacks also performed well, increasing 11.8% in the 12-week period, offset by 19.2% declines in Hershey's refreshment products as the functional need for breath freshening has lessened with social distancing.

Full-year reported net sales are expected to increase around 1.0%. This reflects a two point headwind from COVID-19 in international and other segment.

Full-year reported earnings per share-diluted are expected to be in the range of $6.03 to $6.11, an increase of 10.0% to 12.0% versus 2019. Full-year adjusted earnings per share-diluted are expected to be in the range of $6.18 to $6.24, an increase of 7% to 8% versus 2019.

For an update on how the coronavirus pandemic is affecting convenience services, click here.