Two Strong Arguments for Immediately Investing in Hershey Shares Without Delay
Hershey's investors are crossing their fingers for a sugarcoated future in 2025, following a rocky 2024. The confectionery giant, known for its signature chocolate and iconic brands like Reese's and Kit Kat, has struggled with underperforming sales, leading to a 12% drop in its stock over the past year.
However, this difficult period might offer a sweet opportunity. Here's why:
1. Navigating Short-Term Challenges
Hershey's lengthy legacy spans over 125 years in the consumer goods industry. Despite the occasional setbacks, its portfolio, which includes popular candy brands, has demonstrated potential for worldwide growth. The company's strategic acquisitions of SkinnyPop popcorn and Dot's Pretzels have been key growth drivers.
The challenges faced by Hershey in 2024 mirrored broader headwinds affecting the packaged foods sector. Customers have tightened their belts on discretionary spending in response to higher pricing, and Hershey's exposure to inflated cocoa prices further impacted its profit margin.
Though third-quarter sales decreased by 1.4%, the company remained optimistic, projecting a flat sales growth in 2024 and a modest 6% decline in adjusted earnings per share. The company predicts an improvement in cocoa prices by 2025 with a projected global surplus, signaling a potential boost to its financial performance.
2. Undervalued Sweet Deal
Hershey's stock currently trades at a reasonable 19x trailing-12-month earnings (P/E ratio), compared to its average earnings multiple of 27x over the past decade. This undervalued stance might attract potential buyers, as evidenced by Mondelez International's reported interest in acquiring Hershey.
Although uncertain, the potential for an acquisition could serve as a safety net for investors. Hershey's status as a coveted acquisition target among consumer staples companies reduces the downside risk.
Final Thoughts: Investing in Sweet Opportunities
Despite the current market uncertainties, Hershey presents an attractive investment opportunity. The company's proven track record, brand portfolio, and resilient financial standing make it a strong contender for sustained growth in 2025. Best of all, as a dividend-paying stock, Hershey could serve as an appealing component in a well-diversified investment portfolio.
- Given the recent challenges in the packaged foods sector, investors might find an undervalued opportunity in Hershey's shares, as the company's stock trades at a lower 19x trailing-12-month earnings compared to its average of 27x over the past decade.
- As Hershey's stock is currently underpriced, potential buyers might be attracted, especially considering the company's reported interest in acquiring Hershey, which could serve as a safety net for investors facing the downside risk.
- Despite the 12% drop in Hershey's stock over the past year due to underperforming sales, investors should consider the company's strong financial standing and proven track record, as well as its strategic acquisitions like SkinnyPop popcorn and Dot's Pretzels that have bolstered growth.
- As Hershey continues to navigate short-term challenges, such as responding to higher pricing and inflated cocoa prices, its optimistic outlook for 2025, with predictions of improved cocoa prices and flat sales growth, presents an appealing investment opportunity for portfolio planning in 2023.
