Is Hershey Stock a Buy as Earnings Rebound but Valuation Stays High?

The Hershey Company HSY delivered a much stronger second quarter, with earnings and margins rebounding as pricing, lower commodity costs and productivity improved profitability. Management also narrowed its 2026 sales and adjusted earnings outlook toward the upper end of prior ranges.

The trade-off is that organic growth still depended heavily on price increases while volumes fell, and the stock continues to command a premium to its sub-industry. The investment case therefore hinges on whether the recovery is strong enough to justify that premium while execution risks remain.

HSY’s Earnings Rebound Strengthens the Bull Case

Hershey posted second-quarter adjusted earnings of $1.90 per share, up 57% year over year and above the Zacks Consensus Estimate of $1.45. Net sales increased 6.6% to $2,787.3 million, also exceeding the consensus mark of $2,649 million.

Profitability improved sharply. Adjusted gross margin expanded 350 basis points to 41.6%, while adjusted operating margin rose 450 basis points to 20.2%. Pricing, lower net commodity costs and productivity savings more than offset higher logistics expenses and unfavorable mix.

Image Source: Zacks Investment Research

Hershey’s Growth Outlook Still Depends on Pricing

Organic, constant-currency sales rose 3.6% in the second quarter as roughly 12 points of net price realization offset an 8-point volume decline. North America Confectionery volume fell about 10 points as higher prices affected demand.

Management said elasticity increased slightly but remained somewhat better than its full-year expectations. Hershey now expects 2026 net sales growth of 4.5%-5%, organic sales growth of 3%-3.5% and adjusted earnings growth of 32.5%-35%, leaving volume response central to the outlook.

HSY Trades at a Premium to Its Confectionery Peers

HSY trades at 19.95X forward 12-month earnings compared with 16.33X for its Zacks sub-industry and 17.49X for the Zacks Consumer Staples sector. The multiple remains below its five-year median of 25.02X but above the five-year low of 18.03X.

Mondelez International, Inc. MDLZ is another global snacking company whose core business includes chocolate, with brands such as Cadbury Dairy Milk, Milka and Toblerone. Tootsie Roll Industries, Inc. TR operates solely in confectionery, with brands including Tootsie Roll, DOTS and Junior Mints. These alternatives add context to Hershey’s valuation while its volume trends remain pressured.

Hershey’s Salty Snacks Add Growth and Execution Risk

North America Salty Snacks sales increased 22.9% to $387.8 million, but the LesserEvil acquisition contributed about 22 percentage points. Organic, constant-currency sales rose just 0.6%, even as retail takeaway excluding LesserEvil increased 6.5%.

Execution remains the offset. Supply constraints affected multipacks and Dot’s pretzels, while segment income declined 5.9% to $62.6 million. The segment margin contracted 500 basis points to 16.1%, reflecting higher logistics costs, lower net price realization, increased consumer marketing and unfavorable mix.

Image Source: Zacks Investment Research

HSY’s Ratings Point to Selective Optimism

For now, Hershey’s profile supports patience rather than a clear buy signal. HSY carries a Zacks Rank #3 (Hold), a rating that can support holding a stock while the strongest purchase emphasis in the Zacks framework is generally reserved for Rank #1 and #2 stocks paired with favorable Style Scores. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HSY has a VGM Score of B, Growth Score of A, Value Score of C and Momentum Score of C. The Growth Score and VGM Score are favorable grades, while the Value and Momentum readings sit below the A and B grades favored by the Style Score framework. Together, the ratings leave room for selective optimism without removing the valuation and execution questions. 

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research