Hershey Company (NYSE:HSY) is actually putting in new 52-week lows, and not even a new coffee chocolate with Starbucks (NASDAQ:SBUX) is helping the chocolate-maker’s shares. The company posted sales of $1.05 Billion, almost identical to 2006, and its net income was $0.01 GAAP and $0.35 EPS before charges. Unfortunately, even though First Call was expecting $0.35 EPS and $1.07 Billion in revenues, that is well over a 10% drop from last year. Adverse dairy prices and the slower-to-improve economy were the culprits, and that global supply chain transformation was a significant charge.
The outlook is the main issue here. The company forecast is now expecting sequential improvement in organic net sales that will result in full year 2007 growth in the low-single digit range. But Hershey said that higher dairy costs will continue to pressure margins for the balance of the year, and branding investments will result in a mid-single digit decline in earnings per share-diluted from operations for 2007.
Let’s pretend the company managed to actually hit the estimate of $2.45 for fiscal 2007. Even after the near 3% drop today, that represents a forward P/E ratio of 19.8. If it can meet the 2008 target of $2.68, its forward P/E for 2008 is going to be 18.11. It sure doesn’t sound like the company is expecting to hit at least 2007 estimates, so that theoretical forward P/E ratio is lower then reality. Unfortunately this is somewhat comparable to Coca-Cola NYSE:) and Pepsico (NYSE:PEP), but those businesses are solid and growing. For Hershey, anything south of $48.96 will mark a new 52-week low close and even worse if you look at a two-year picture.
As a reminder, Hershey is one of those companies that is also immune from excessive outside control or influence and is deemed equally immune to any hostile outside buyout as super-shares are controlled by the founding family members.
Jon C. Ogg
July 19, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
The Average American Has No Idea How Much Money You Can Make Today (Sponsor)
The last few years made people forget how much banks and CD’s can pay. Meanwhile, interest rates have spiked and many can afford to pay you much more, but most are keeping yields low and hoping you won’t notice.
But there is good news. To win qualified customers, some accounts are paying almost 10x the national average! That’s an incredible way to keep your money safe and earn more at the same time. Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 3.80% with a Checking & Savings Account today Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Click here to see how much more you could be earning on your savings today. It takes just a few minutes to open an account to make your money work for you.
Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 4.00% with a Checking & Savings Account from Sofi. Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.