The U.S. and Mexican governments have reached an "agreement in principle" designed to avert a trade war over sugar, setting the course for bigger talks on rewriting NAFTA.
While American producers failed to endorse the deal, the pact will go through a final drafting stage, during which the two sides will try to make it easier for them to "come on board," said U.S. Commerce Secretary Wilbur Ross.
Susquehanna's Pablo Zaunic trims its price target on Hershey (NYSE:HSY) after setting a lower M&A premium and seeing some risk of chocolate and other sweets losing shelf space in key parts of the stores.
The analyst also notes the commodities costs are starting to bottom.
"We cut our estimates through 2019, and take a 5% peer premium on our tax-adjusted EBITDA, with our price target now $115 by Dec’17," writes Zuanic. The previous price target was $119.
Hershey (NYSE:HSY) reports Q1 profit ahead of estimates as its gross margin rate of 47.5% topped the consensus estimate of 46.8%. Cost savings initiatives and supply chain productivity improvement helped lift the margin rate.
Net volume was up 0.7% during the quarter, while the company realized a two point benefit due to lower levels of trade.
Looking ahead, Hershey says it expects full-year sales to fall at the low end of its range for 2% to 3% growth and sees EPS of $3.31 to $3.55.
"We anticipate that our innovation, as well as our consumer marketing plans, will enable us to build on our first-quarter U.S. CMG market share gains," says CEO Michele Buck.
Shares of Hershey are up 0.64% premarket to $109.15.
Susquehanna analyst Pablo Zuanic bumps up his price target on Hershey (HSY -0.2%) after factoring in the changes to the company and the board of the controlling trust.
"We would not expect the new trust to make such a momentous decision (diversification) until 2019 at the earliest," notes Zuanic.
"In the meantime, HSY shares trade at 10% premium to peers (22.2x 1yF PE), which in our view captures the near/medium term upside (a better innovation cycle; more aggressive profit margin targets; M&A optionality). Definitely not a stock to short given these various tailwinds despite the premium, but we would not see HSY outperforming the peer group in the year ahead," he adds.
Susquehanna has a Neutral rating and $119 price target on Hershey.
Hershey (NYSE:HSY) and the trust that control it are filling positions on their respective boards following a year marked by a $23B acquisition overture from Mondelez (NASDAQ:MDLZ) and a series of resignations.
The departures followed criticism of poor governance, excessive compensation and unnecessary expenses at the Hershey Trust by its overseer, the Pennsylvania attorney general.
While it's no surprise that 3G-backed Kraft Heinz (NASDAQ:KHC) had one of the best adjusted EBITDA margin rates in the packaged food sector with a 31.0% mark in 2016, the company nipping at its heels could be a shocker to some.
Hostess Brands (NASDAQ:TWNK) ranked second with an adjusted EBITDA margin last year of 29.5% of sales.
Adjusted EBITDA margin rate marks for another names in the sector: Amplify Snack Brands (NYSE:BETR) 29.0%, B&G Foods (NYSE:BGS) 22.7%, J.M. Smucker (NYSE:SJM) 21.7%, Hershey (NYSE:HSY) 21.7%, Pinnacle Foods (NYSE:PF) 21.0%, Post Holdings (NYSE:POST) 18.3%, McCormick & Company(NYSE:MKC) 17.5%, Lancaster Colony (NASDAQ:LANC) 17.5%, Snyder's-Lance (NASDAQ:LNCE) 17.5%, Flower Foods (NYSE:FLO) 11.4%, TreeHouse Foods (NYSE:THS) 10.4%.
Hershey (NYSE:HSY) -0.3% AH after announcing a 15% global workforce reduction as part of its "Margin for Growth" program intended to grow its core candy business and expand its snacks offerings and generate 22%-23% adjusted operating profit margin by year-end 2019; HSY had ~16,300 full-time and 1,680 part-time employees worldwide at year-end 2016.
HSY expects cost savings from the plan of $150M-$175M by year-end 2091, and says the plan will result in pre-tax charges of $375M-$425M, including one-time layoff costs of $80M-$100M.
HSY also expects FY 2017 adjusted EPS to increase 7%-9% and come in at $4.72-$4.81 vs. $4.64 analyst consensus estimate, and reaffirms its net sales growth target of 2%-3%.