Confectionery company Hershey Co. (NYSE: HSY) came out with its second-quarter 2015 earnings and it was not pretty. Revenue came in at $1.58 billion, and the company reported a net loss of $0.47 per share on a diluted basis. The average analyst estimates were $1.62 billion in revenue and $0.75 earnings per share. Hershey did report an EPS of $0.78 per share on an adjusted basis. Here is what happened.
Poor macroeconomic conditions in China made an impact on sales in the region. Frightened competitors made moves detrimental to Hershey. This caused Hershey’s Chinese subsidiary, Shanghai Golden Monkey, to perform below expectations. As a result, Hershey evaluated the company and determined that it should incur a goodwill impairment charge for its Chinese business, which put Hershey into the net loss range for the quarter. Hershey may incur further write-downs in the third quarter. Hershey’s market share loss amounted to 0.1 points in China.
By contrast, smaller rival Tootsie Roll Industries Inc. (NYSE: TR), which operates primarily in the United States, Canada and Mexico, performed pretty well in its most recent quarter. Tootsie Roll saw its revenue and net income increase 3% and 23%, respectively, year over year. New products and clever marketing helped drive sales. Also, not being exposed to the macroeconomic headwinds of China served Tootsie Roll and its shareholders well in the most recent quarter.
Not everything is bad for Hershey. North America performed well. The company gained 0.1 points in market share in the United States. The company expects a strong Halloween and holiday season and anticipates that new products such as Brookside Fruit and Nut Bars in North America will drive sales forward. However, Hershey revised its fiscal 2015 revenue estimate downward again to the 1.5% to 2.5% range from the previous 4% to 5% range.
ALSO READ: 8 Large Companies Valued Under 10 Times Earnings
The analyst consensus target comes in at $95.31 per share for Hershey, representing a 7% potential gain from its current stock price. Tootsie Roll may continue to perform well if it can keep up its pace of new product innovations and taking prudent steps in international expansion.
Note that William Bias owns shares in Hershey.
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
