The Hershey Company (NYSE:HSY) is an American chocolate and confectionery company with some iconic brands such as Hershey kisses and Reese's peanut butter cups. This article will explore the investment merits that HSY poses. I will cite three main reasons for your consideration.
HSY is a wide moat company as evidenced by its consistent and stable revenues. HSY has managed to grow revenues from $336.3 million in 2001 to 6.080 billion in 2011. HSY was able to achieve this growth primarily through the durability of their iconic brands such as Twizzlers, Kit Kat along with well executed acquisition such as Mauna Loa Macadamia Nut Corporation. HSY stable of brands has given them the parent company pricing power over generic knockoffs.
$68.40 - $69.51
52 Week range
$53.83 - $71.00
Avg. Volume (10 Day)
Put/Call Ratio (1 Day)
Put/Call Ratio (30 Day)
Earnings TTM (GAAP)
Earnings per Share (04/24/2012)
Quarterly Div. (Ann. Yield)
May 23, 2012
Previous Pay Date
Jun 15, 2012
Market Capitalization (Mid Cap)
Shares Held By Institutions
Financial info provided by Charles Schwab.
The second reason for a potential investment in HSY is the stable and growing dividend. The company currently pays a 2.19% dividend which is significantly higher than the 10 year US Treasury bond. As we can see from the chart above HSY sports a beta of 0.27 making it far less volatile than the overall market. With volatility increasing due to uncertainty overseas primarily in Europe a low beta stock such as HSY can make one sleep well at night.
The third and, in my opinion, most intriguing reason is the CEO's comments today about future growth and the company's willingness to make acquisitions. The CEO stated the company plans to use cash to make acquisitions.
Hershey sets new growth targets for the future, along with a plan to expand core brands such as Hershey's Kisses, Jolly Rancher, and Reese's. The company expects to see sales grow 5% to 7% in the long term and forecasts EPS growth of 8% to 10%, while 2012 targets are reaffirmed at their current levels.
The company plans on increasing sales from a current $6.1 billion in sales to roughly $10 billion by 2017. If the company is successful a conservative long term investor should be rewarded handsomely with capital gains along with a steady dividend payment.
In summary, HSY is low risk equity offering an interesting mix of capital gains and dividends. The stock, in my opinion, trades above a market multiple due to its stable and predictable business. I would like to see the equity trade in the $60-62 range before initiating a position. I will be watching as the uncertainty of the summer heats up to see if I will have my opportunity. Thanks for reading and I look forward to your comments.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HSY over the next 72 hours.
Additional disclosure: The information provided from the above article is for informational purposes only. Thank you for reading and I look forward to your comments.