Hershey Foods (HSY) Tops Q4 EPS by 3c

Hershey Foods (NYSE: HSY) reported Q4 EPS of $1.08, $0.03 better than the analyst estimate of $1.05. Revenue for the quarter came in at $1.91 billion versus the consensus estimate of $1.98 billion.

"We made progress against our strategic initiatives in 2015, generated solid gross margin expansion in North America and largely maintained our overall U.S. candy, mint and gum (CMG) market share as retail takeaway on our U.S. core brands increased,” said John P. Bilbrey, Chairman, President and Chief Executive Officer, The Hershey Company. “The Krave meat snacks business and integration is on plan and the Reese’s Snack Mix, Hershey’s Snack Bites andBrookside dark chocolate fruit and nut bar launches are in line with expectations. We are listening to consumers and their changing preferences with respect to simple ingredients and transparency. During the fourth-quarter holiday season we nationally debuted Holiday Hershey’s Kisses Milk Chocolates and Hershey’s Milk Chocolate Bars, made with simple ingredients and no artificial flavors. These are some of the first products from Hershey to transition to simpler ingredients, a commitment announced last year. Holiday Hershey’s Kisses Milk Chocolates packages were also the first to pilot the SmartLabel, which allows consumers to scan a QR code and instantly access detailed product information, from ingredient and nutrition facts to allergens. Our solid balance sheet and continued strong cash flow generation enabled us to return nearly $900 million to shareholders through a 9% dividend increase and meaningful share repurchase activity. Additionally, earlier today we announced that the Board of Directors has approved a new $500 million stock repurchase authorization.”

Outlook

“Over the long term we expect constant currency net sales growth of 3% to 5%,” Bilbrey continued. “This reflects challenges related to changing U.S. shopping habits and volatile international markets. We remain focused on growth and will continue to invest in our core brands in the U.S. and key international markets and build on the strategies we have established as we believe they will benefit the company over the long term. We will also make incremental investments in our existing snacks platform as it will provide us with another lever of growth. Over time, these initiatives should enable us to achieve consistent sales and earnings growth. Given the scale advantages of our North America business and a balanced approach to international investments, the company expects to generate long-term adjusted earnings per share-diluted growth of 6% to 8%."

In 2016, the company estimates full-year reported net sales will increase around 2.0%, including unfavorable foreign currency exchange of about 1 percentage point. Excluding unfavorable foreign currency exchange rates, full-year constant currency net sales growth is expected to be around 3.0%. North America net sales are expected to be driven by confectionery and snacks growth, including Krave meat snacks distribution gains. The company has many exciting new products that will bring variety, news and excitement to our core brands as well as the confectionery and snack categories, including Reese’s Snack Mix and Hershey’s Snack Bites canisters, Cadbury Chocolates in a stand-up pouch targeting the mass premium market, the introduction of Allan Candy sugar confectionery peg bag items and some other yet to be announced new candy and snacking products. The company expects gross margin to be about the same as last year. The business productivity initiative announced in June is on track and the company is also focused on non-essential SM&A spending as it continues to leverage existing resources. Additionally, the company will continue to invest in advertising and related consumer marketing, including a greater shift to digital and mobile communication. As a result, the company expects adjusted earnings per share-diluted for 2016 to increase about 6.0%.

For earnings history and earnings-related data on Hershey Foods (HSY) click here.

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