Hershey for Income Investors | Buying the Dividend

Hershey for Income Investors | Buying the Dividend Growth While Earnings Are Still Recovering

Q2 sales $2.79B (+6.6%), adj EPS $1.90 vs $1.43, guidance raised to $8.36-8.52; shares $176, ~26% below 52-week high - evaluate how much recovery is priced

North America confectionery sales $2.17B (+4.2%), price +14 pts, volume -10 pts; segment income +40.1% to $705.8M, margin 32.5% - elasticity deteriorating

Adj gross margin +350bps to 41.6%, TTM gross 38.4% vs 5yr avg 42.8%; cocoa avg $1.80/lb H1 2026, spot now ~$2.95/lb, hedges create 3-24 month cost lag

TTM operating cash $2.66B, FCF $2.23B ($11.09/sh), 6.3% cash yield at $176; dividends use ~50% of FCF, interest coverage 9.4x, net debt/EBITDA 1.82x

Valuation spread $115-$230 across models; blended P/E 22.9x vs 10yr 23.4x - upside to $234.65 or downside to $150.24 at 15x, firm blend ~$200 (≈13.9% upside)

On July 30, Hershey (HSY) reported second quarter net sales of $2.79 billion, up 6.6%, and adjusted earnings of $1.90 a share versus a $1.43 consensus estimate. Guidance moved to the top half of the prior range, at $8.36 to $8.52 in adjusted EPS.

Shares fell that morning and closed September 1 at $176, about 26% below the 52-week high.

Good news followed by a lower share price is not a buy signal by itself, so let me ask a better question.

How much of the earnings recovery is already sitting in $176?

The quarter was stronger than the volume line and weaker than the headline

Start with where the profit came from. North America Confectionery booked $2.17 billion in sales, up 4.2%, built on roughly 14 points of net price realization against a volume decline of about 10 points. Segment income rose 40.1% to $705.8 million and segment margin reached 32.5% from 24.2% a year earlier.

Hershey for Income Investors | Buying the Dividend Growth While Earnings Are Still Recovering

The quarter was stronger than the volume line and weaker than the headline

Keep Reading