Hershey (HSY) Gains on Prudent Acquisitions & Brand StrengthHershey (HSY) makes several strategic acquisitions to enhance its brand portfolio. The company's solid pricing initiatives are also yielding.
By Zacks Equity Research September 13, 2021
This story originally appeared on Zacks
The Hershey Company HSY is in a robust shape, courtesy of its prudent buyouts and pricing initiatives. The company’s strong brand portfolio and focus on innovation are noteworthy. Apart from these, it has been benefiting from impressive recovery in away-from-home consumption and international markets. Sustained at-home consumption is also driving growth. These were reflected in the company’s second-quarter 2021 results, with the top and the bottom line surpassing the Zacks Consensus Estimate as well as increasing year over year.
The currently Zacks Rank #2 (Buy) stock has increased 14.1% in the past six months compared with the industry’s 11% growth. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 3.3% growth in the period.
Let’s delve deeper.
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Strategic Acquisitions Fuel GrowthHershey has made several strategic acquisitions to enhance its brand portfolio. On Jun 25, 2021, the company concluded the acquisition of Lily's Sweets, LLC (Lily's) — a leading better-for-you (“BFY”) confectionary brand. The buyout is in sync with its focus on creating an impressive BFY confection portfolio as part of its multi-pronged better-for-you snacking strategy.
The company acquired ONE Brands, LLC in September 2019 to solidify its footing in the snacking category. Hershey acquired the Pirate Brands in October 2018 to bolster its snacking business. Additionally, the company is gaining from the Amplify Snack Brands, which was acquired in January 2018, to expand in the snacking category. During its second-quarter 2021 earnings call, management highlighted that its Pirate’s Booty and ONE nutrition bar brands increased significantly. The company saw robust rebound in ONE nutrition bars, with retail sales increasing 18% in the last 12 weeks.
Strategic Pricing & Focus on InnovationHershey has been undertaking strategic pricing initiatives to improve its performance. Net price realization benefited Hershey’s top line by 1.0 points in the second quarter of 2021. In the International and Other segment, price realization contributed 15 point benefits to net sales.
Hershey’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly on the back of advertising investments, in-store merchandising as well as programming and innovation. The company regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio. In its last earnings call, management highlighted that its Reese’s innovation including the Reese’s Pretzel and limited edition Peanut Butter Lovers products are driving growth. Moreover, Hershey is committed toward supporting its brands through solid media marketing.
We believe that the above-mentioned upsides are likely to keep working for Hershey.
Simply Safe Dividends assigns HSY a 93 Very Safe dividend rating with a 2.05% yield. The latest dividend increase was 12% and it has a 5 year dividend growth history of 7%.
HSY is a current holding in the Older Folk Portfolio. |
