Hershey surges on earnings beat, bullish 2026 guidance
Confectionery giant raises 2026 EPS outlook by up to 89% as automation initiatives take hold
Hershey shares rose sharply in early trading Thursday after the confectionery giant reported fourth-quarter earnings that far exceeded analyst expectations and delivered an unexpectedly bullish outlook for 2026.
The Pennsylvania-based company reported adjusted earnings per share of $1.71 for the quarter, beating the consensus estimate of $1.06 by 60.8%, according to the trading signal. The results came despite a slight revenue miss, highlighting the company's ability to deliver profitability growth even as sales face pressure from challenging market conditions.
Most notably, Hershey raised its guidance for 2026 with striking confidence. The company now projects reported EPS of $7.77 to $8.19 for 2026, representing an increase of 79% to 89% from prior expectations. On an adjusted basis, management forecast EPS of $8.20 to $8.52, reflecting growth of 30% to 35%. The company also expects sales growth of 4% to 5% for 2026.
The dramatic improvement in the outlook reflects Hershey's ongoing transformation efforts under its "Advancing Agility & Automation" initiative. The company plans to deliver $100 million in automation savings, part of a broader cost-restructuring program aimed at offsetting commodity inflation and improving margins. The broader Triple A program targets $400 million in net savings, which analysts expect to restore over 500 basis points of adjusted gross margin in 2026.
Chief Executive Officer Michele Buck expressed "strong conviction in momentum" during the earnings announcement, according to the signal, signaling management's confidence in the company's strategic direction despite near-term headwinds.
The positive results come at a critical time for Hershey, which has faced pressure from volatile cocoa prices and shifting consumer demand. Cocoa prices have fallen approximately 27% over the past month, a development that Morgan Stanley estimates could add roughly $0.70 to Hershey's 2027 base-case EPS estimate. Piper Sandler analysts have estimated that the decline in cocoa costs could generate $50 million per quarter in savings for the confectionery maker.
Shares of Hershey were trading at $205.79, up more than 2% and near the stock's 52-week high of $204.35. The stock has gained nearly 15% over the past 20 trading days as investors have grown increasingly optimistic about the company's margin recovery prospects.
Despite the recent rally, some analysts maintain cautious views on the valuation. The stock currently trades at a forward price-to-earnings multiple of approximately 30 times, with an average analyst target price of $199.39, slightly below current levels. Of 25 analysts covering the stock, 17 rate it a hold, while 7 maintain buy recommendations.
Hershey's strong earnings beat and raised guidance underscore the company's ability to navigate through commodity volatility and competitive pressures. The confectionery giant has been investing in its core brands while expanding into adjacent categories, positioning itself for growth as consumers increasingly seek both indulgence and value in their purchasing decisions.
Looking ahead, investors will focus on Hershey's execution of its automation and productivity initiatives, which management expects to drive margin expansion and earnings growth over the next two years. The improving commodity environment, particularly in cocoa, provides additional tailwinds that could support the company's ambitious 2026 targets if sustained.