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The Ratings Game: Hershey’s Q3 results ‘cleared a high bar’ but outlook conservative, says UBS analyst


Hershey Co.’s third-quarter results surpassed investors’ lofty expectations but the company’s raised outlook is conservative, according to UBS analyst Cody Ross.

The maker of Reese’s Peanut Butter Cups, Kit Kats, Hershey’s Kisses, Mounds and Almond Joy reported before Friday’s open better-than-expected revenue and raised its 2022 outlook, boosted by improving market share and gross margin.

“Heading into the print, we were concerned that investors’ expectations were getting ahead of themselves,” wrote UBS’s Ross, in a note released on Friday. “However, to our surprise, [Hershey] cleared a high bar, aided by 1 [percentage point] of retailer inventory replenishment and 2 [percentage points] of earlier seasonal shipments.”

See Now: Hershey stock climbs on Q3 revenue beat, raised outlook

The analyst pointed to Hershey’s

“high-quality” earnings beat, and “significant outperformance” in its North America confectionary business. In Hershey’s earnings release, CEO Michele Buck said the company has strong momentum exiting 2022.  

Set against this backdrop, UBS’s Ross says that Hershey’s outlook seems cautious. “Looking at the implied guide for 4Q22, we believe many will view it as conservative,” he wrote. “HSY noted it is likely to enter ’23 with strong momentum on top and bottom line, driven by strong price contribution.”

After rising nearly 2% in premarket trading, Hershey’s stock reversed course and was falling 2.5% in midday trading.

Hershey’s stock has risen 16.9% this year, compared with the S&P 500 index’s

decline of 22.0% over the same period.

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UBS has a neutral rating and $235 price target for Hershey.

Of 22 analysts surveyed by FactSet, eight have a buy rating, 12 have a hold rating and two have an underweight or sell rating for Hershey.

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