Marking the strongest growth since 2014, Hershey Co HSY generated robust EBIT growth in 2020 driven by gross margin expansion “that was amplified by expense controls,” according to Goldman Sachs.
The Hershey Analyst: Jason English upgraded the rating for Hershey from Neutral to Buy, while raising the price target from $171 to $181.
The Hershey Thesis: The performance in 2020 was not a one-off and the COVID-19-related impact was “only a modest positive,” English said in the upgrade note.
He believes 2020 “was the beginning of a three-plus-year cycle of outsized growth as the confection industry leverages its unique pricing power to expand the revenue and profit pool at a time when input costs are non-daunting.”
“Mars appears to be leading the charge, presumably as it prioritizes pet and veterinarian verticals for growth. We expect Hershey to follow over time, continuing the long-standing industry practice of unified price moves,” the analyst wrote.
“In our view, the result will be a top-tier growth algorithm that contrasts with a muted growth outlook for many US-centric Staples peers,” he added.
HSY Price Action: Shares of Hershey had risen by 1.26% to $160.12 at the time of publication Thursday.
(Photo: Hershey)
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