Hershey (NYSE:HSY) Reports Strong Q1

Anthony Lee /
2024/05/03 6:52 am EDT

Chocolate company Hershey (NYSE:HSY) reported Q1 CY2024 results topping analysts' expectations, with revenue up 8.9% year on year to $3.25 billion. It made a non-GAAP profit of $3.07 per share, improving from its profit of $2.96 per share in the same quarter last year.

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Hershey (HSY) Q1 CY2024 Highlights:

  • Revenue: $3.25 billion vs analyst estimates of $3.11 billion (4.5% beat)
  • EPS (non-GAAP): $3.07 vs analyst estimates of $2.76 (11.2% beat)
  • Reiterated full year outlook for sales and EPS (non-GAAP) growth
  • Gross Margin (GAAP): 51.5%, up from 46.3% in the same quarter last year
  • Organic Revenue was up 8.6% year on year
  • Sales Volumes were up 3.4% year on year
  • Market Capitalization: $40 billion

"We are off to a strong start and remain on track to deliver our business strategies and financial commitments for the year," said Michele Buck, The Hershey Company President and Chief Executive Officer.

Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE:HSY) is an iconic company known for its chocolate products.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

Hershey is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 10.8% over the last three years was decent despite selling a similar number of units each year. We'll explore what this means in the "Volume Growth" section.

Hershey Total Revenue

This quarter, Hershey reported solid year-on-year revenue growth of 8.9%, and its $3.25 billion in revenue outperformed Wall Street's estimates by 4.5%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Hershey generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Hershey's quarterly sales volumes have, on average, stayed about the same. This stability is normal as the quantity demanded for consumer staples products typically doesn't see much volatility. The company's flat volumes also indicate its average organic revenue growth of 8.9% was generated from price increases.

Hershey Year-On-Year Volume Growth

In Hershey's Q1 2024, sales volumes jumped 3.4% year on year. This result was in line with the 3.3% year-on-year increase it posted 12 months ago.

Key Takeaways from Hershey's Q1 Results

We liked that gross and operating margin beat analysts' expectations this quarter. That the company reiterated its full year guidance means it's staying squarely on track. Zooming out, we think this was a solid quarter. The stock is up 2.6% after reporting and currently trades at $201 per share.

Hershey may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.