February 5, 2026
Finance

Hershey Projects Growth and Enhances Dividend Amid Commodity Cost Pressures

Chocolate Giant’s Q4 Sales Beat Expectations Despite Volume Challenges and Margin Pressures

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Summary

The Hershey Company reported stronger-than-expected fourth-quarter financial results bolstered by net sales growth, yet faced pressures from consumer volume sensitivity and elevated costs. The company increased its quarterly dividend and anticipates improved earnings in fiscal 2026, projecting adjusted earnings per share above analyst estimates despite ongoing margin headwinds.

Key Points

Hershey’s Q4 adjusted earnings per share reached $1.71, exceeding the $1.40 consensus estimate.
Net sales increased 7% year-over-year to $3.09 billion, driven by organic growth and acquisitions.
Adjusted gross margin declined by 650 basis points due to commodity cost increases and tariff impacts.
The company raised its quarterly dividend by 6%, reflecting confidence in future performance.

The Hershey Company, a major player in the confectionery industry, unveiled its financial performance for the fourth quarter of 2025, surpassing analyst expectations on several key fronts despite encountering volume declines related to consumer price sensitivity. Demonstrating resilience, Hershey achieved substantial net sales growth even as it contended with rising commodity and tariff costs alongside increased operating expenses.

In its quarterly report, Hershey announced adjusted earnings per share (EPS) of $1.71, outperforming the consensus analyst estimate of $1.40. Concurrently, the company posted net sales totaling $3.09 billion for the quarter, reflecting a 7% year-over-year increase and exceeding the forecast of $2.98 billion. On an organic, constant-currency basis, net sales climbed 5.7%, with acquisitions contributing an additional 1.2 points to this growth and currency fluctuations providing a marginal 0.1-point uplift.

Breaking down segment performance, Hershey's North America Confectionery division generated net sales of $2,478.5 million, an increase of 5.3% compared to the previous year’s corresponding quarter. This improvement was partially offset by volume declines attributed to elasticity in consumer demand. Furthermore, the North America Salty Snacks segment reported a significant 28% sales increase, reaching $357.0 million. Internationally, Hershey’s segment witnessed a modest 0.4% sales gain, amounting to $255.6 million in the fourth quarter.

Despite topline gains, the company’s adjusted gross margin experienced considerable compression, decreasing by 650 basis points to 38.3%. This margin contraction stemmed from a combination of factors, including elevated commodity prices, tariff-related expenses, lower sales volumes, and timing effects associated with inventory valuation methodologies. Consequently, adjusted operating profit declined by 24% year-over-year to $529.3 million, with the adjusted operating margin falling 700 basis points to 17.1%. The margin pressure was further intensified by rising selling, marketing, and administrative expenditures.

As of the end of the fiscal quarter, Hershey maintained a cash and equivalents balance of approximately $925.9 million, underscoring a solid liquidity position amidst the challenging operating environment.

In a move indicative of confidence in its financial future, Hershey raised its quarterly dividend by 6%, increasing the payment from $1.37 to $1.452 per share. The dividend is scheduled for distribution on March 16, 2026, to shareholders recorded as of February 17, 2026.

Looking ahead to fiscal 2026, Hershey projects adjusted earnings per share in the range of $8.20 to $8.52, accompanied by anticipated net sales between $12.159 billion and $12.277 billion. These figures surpass prevailing analyst expectations, which forecast $7.15 EPS and $12.007 billion in sales respectively. Additionally, GAAP earnings for 2026 are estimated between $7.77 and $8.19 per share, again exceeding consensus estimates of $7.08 per share.

Market reaction to the earnings announcement was positive, with Hershey shares increasing by 7.03% to $220.26 at the time of reporting. This price action marked a new 52-week high for the stock, reflecting investor optimism around the company's prospects despite current margin headwinds.


Key Points
  • Hershey's Q4 2025 adjusted EPS of $1.71 and sales of $3.09 billion exceeded analyst expectations despite volume pressure due to consumer price sensitivity.
  • Adjusted gross margin contracted 650 basis points to 38.3%, affected by higher commodity and tariff costs and lower volume.
  • The company raised its quarterly dividend by 6%, signaling financial confidence.
  • Fiscal 2026 outlook indicates adjusted EPS between $8.20 and $8.52 and sales around $12.2 billion, both above analyst estimates.
Risks and Uncertainties
  • Ongoing margin pressure from elevated commodity prices and tariffs may continue to impact profitability.
  • Consumer price elasticity leading to volume declines poses challenges to revenue growth.
  • Increasing selling, marketing, and administrative expenses may further weigh on operating margins.
  • Inventory valuation timing effects could introduce earnings volatility.
Risks
  • Margin headwinds persist owing to higher commodity and tariff costs impacting profitability.
  • Volume decreases linked to consumer price sensitivity continue to pressure sales growth.
  • Rising operating expenses, including selling and administrative costs, may decrease operating margins.
  • Inventory valuation timing impacts could lead to earnings variability.
Disclosure
Education only / not financial advice
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