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Headquartered in Hershey, Pennsylvania, US, The Hershey Company is a global snacking powerhouse that has generated moments of goodness for its customers for over a century. The company was founded by Milton Hershey in 1894 and initially concentrated on making candy and caramel. Hershey innovated a new chocolate-making process that was insensitive to milk quality and sold the first bars in 1900. The rest, as they say, is history. Hershey is now one of the largest chocolate manufacturers in the world, and it boasts an expanded portfolio of over 90 snacking brands that are sold in over 60 countries.
In more recent years, Hershey has adopted a concentration strategy in its product development and innovation on its portfolio to take advantage of snacking-on-the-go and healthy snacking consumer trends. The company has also sought to achieve these objectives through active participation in the mergers and acquisitions market. Its most notable buys in recent years include Lily’s Sweets, Brookside Foods Ltd., One Brands, Ripple Brand Collective, and Visagis.
The Hershey brand is synonymous with chocolate, but the company has a wide portfolio that includes snack items such as popcorn, cookies, mixes; gum and mint refreshment products; and pantry items such as toppings and sundae syrups. Some of the company’s most iconic brand names include Hershey’s, Kit Kat, SkinnyPop, Reese’s, Jolly Rancher, Pirate’s Booty, and Ice Breakers.
The Hershey Company was first formally incorporated in 1908, and it was reorganised as a publicly-traded company in 1927. The company continues to trade on the New York Stock Exchange to date under the ticker symbol HSY. It is categorised in the Consumer Defensive sector, under the Confectioners industry.
Hershey Stock History
Hershey has implemented a few stock splits during its history, but only one has happened since 2000 – a 2-for-1 on the 15th of June 2004. The HSY stock has been an impressive performer since the turn of the millennium, with the company enjoying dominance of its domestic market and expanding its international reach.
HSY started the new millennium hovering around the $25-price handle, and it embarked on a steady rally that saw its peak at circa $65 by May 2005. The subsequent correction was overextended by the effects of the 2007/8 Great Recession, with the stock dipping to around $30 by March 2009. Since then, it has maintained a steady upward trajectory, breaking above $150 in late 2019. Interestingly, the COVID-19-inspired recession of 2020 triggered a slight dip to lows of circa $120 in March 2020. But the stock proved resilient and posted an amazing comeback that saw it print an all-time high above $182 in August 2021.
Hershey’s stable business has, over the years, made the company a reliable and consistent dividend payer. With a long-term average HSY dividend yield of 2%, Hershey has proven to be a wonderful treat for investors who want consistent income stocks on their portfolios.
How to Trade the HSY Stock
Here are the factors to consider when trading Hershey stock:
- Legislative and Political Issues
The politics of chocolate making primarily involves issues surrounding child labour in West Africa, where cocoa is imported from. As a member of the World Cocoa Foundation, Hershey must continually commit to buying cocoa from certified sources that comply with child labour laws. Legislatively, Hershey has to also deal with sugar taxes and price controls in different jurisdictions as well as licensing contracts with partners and different distributors. Changes in legislative and political issues can significantly impact the business and bottom line of Hershey.
The snacking and confectionery industry is fiercely competitive, and Hershey’s superior positioning is not entirely privileged. The company faces competition from large and diversified players in the industry such as Nestle, Mars, Mondelez International, and Pladis. These competitors can match the product development budgets or strategies of Hershey, and they can aggressively and consistently innovate on new products, tastes, designs, technologies, or supply chains to fight for a significant stake of the market share.
- Commodity Prices
Hershey mainly uses Milk, Cocoa, and Sugar as raw materials for its products. This leaves the company vulnerable to fluctuating commodity prices in the international market. Rising prices of commodity products or the main ingredients can force Hershey to increase their products’ prices, which can, in turn, pile pressure on its sales and eventual margins.
- Periodic Earnings
Hershey’s fiscal year runs from January to December, and the company releases periodic earnings reports to update investors on its business health and performance. Hershey investors typically watch out for metrics such as earnings per share, domestic and international sales, updates on new product development, future guidance, and dividend pay-outs. Strong numbers will tend to inspire higher prices, whereas weak numbers will usually trigger lower stock prices.
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