Hershey Corp. (HSY, -0.27%) announced a fourth-quarter earnings beat on Thursday, causing the market to react with a 3% drop in premarket trades. While the company achieved better-than-expected earnings, it was weighed down by weaker sales and guidance figures.
Strong Earnings Performance
In the fourth quarter, Hershey Corp. reported a net income of $349 million, translating to earnings of $1.70 per share. This is a slight decline compared to the prior year’s quarter, which recorded net income of $396 million and earnings of $1.92 per share. However, the company’s adjusted earnings remained flat at $2.02 per share, matching the figure from the previous year.
Missed Sales Expectations
Fourth-quarter sales amounted to $2.66 billion, representing a modest increase of 0.2% compared to the same period in the previous year. Unfortunately, this fell short of analysts’ expectations, who were anticipating sales of $2.72 billion. Meanwhile, North America Confectionery sales experienced a positive growth of 2.1% year-on-year, but North American salty snack sales saw a significant decline of 24.6% compared to the prior year’s quarter.
Factors Impacting Snack Sales
Hershey attributed the decline in North American salty snack sales to two main factors. Firstly, the company experienced a 26.1% decrease in volume due to planned inventory declines associated with an Enterprise Resource Planning implementation in October 2023. Additionally, category softness within the ready-to-eat popcorn category also contributed to a high-single-digit decline in volume.
Outlook for 2024
Looking ahead, Hershey expects sales to reach between $11.39 billion and $11.5 billion in 2024, resulting in a net sales growth of 2% to 3% compared to the previous year. However, the company anticipates adjusted earnings to remain flat at $9.59 per share, excluding one-time costs related to the ERP implementation and incremental cost savings initiatives. Analysts surveyed by FactSet have slightly higher expectations, projecting sales of $11.59 billion and adjusted earnings of $9.78 per share for 2024.
Dividend Increase
On Thursday, Hershey also announced an increase in dividends of $1.370 on the company’s common stock and $1.245 on its class B common stock, reflecting a substantial 15% rise.
Market Performance
Hershey Corp.’s stock performance has been challenging, with a 17.4% decline over the past 52 weeks. In contrast, the S&P 500 index gained 22.4% during the same period (SPX, +0.82%).