Hershey shares drop premarket despite earnings beat, outlook weighed by cocoa cost

Investing.com - Shares in Hershey Co (NYSE:HSY) fell 4.44% in pre-market trading on Thursday after reporting fourth-quarter earnings on that surpassed analyst expectations, but warned of significant pressure on 2025 earnings due to surging cocoa prices.

The chocolate and snack maker posted adjusted earnings per share of $2.69 for Q4, beating the analyst estimate of $2.38. Revenue for the quarter came in at $2.89 billion, above the consensus estimate of $2.84 billion and up 8.7% YoY.

However, the company provided a cautious outlook for 2025, projecting adjusted earnings per share to be down in the mid-30% range. Hershey expects net sales growth of at least 2% for the year, primarily driven by net price realization.

The company cited higher commodity costs, rebased incentive compensation, and a higher economic tax rate as factors expected to more than offset price realization, productivity, and cost savings programs in 2025.

Organic, constant currency net sales increased 9.0% in Q4, driven by favorable net price realization of approximately 3 points, two additional shipping days, and inventory timing benefits.

"I am pleased to see the consumer response to our agile innovation, marketing and in-store execution as we end the year with momentum across our segments," said Michele Buck, President and CEO of Hershey.

Hershey's Q4 adjusted gross margin increased 60 basis points to 44.8%, as net price realization, higher sales volume, and supply chain productivity more than offset higher commodity costs and negative sales mix.

The company increased its advertising and related consumer marketing expenses by 2.4% in Q4 compared to the same period last year, focusing on increased investments in North America Confectionery and North America Salty Snacks.