Will Hershey's Halloween Week Earnings Trick or Treat Investors?

Hershey Company (HSY) is set to unveil its third-quarter earnings just before Halloween on October 29, as the period encompasses a significant portion of the candy maker's Halloween shipments. The report is expected to shed light on consumer sentiments regarding the pricing of Halloween treats this season.

Hershey's second quarter was robust, with net sales increasing by 6.6% to $2.79 billion and adjusted earnings per share (EPS) rising by 57% to $1.90. Net income surged 629% compared to the same quarter last year, a growth primarily driven by price hikes and reduced cocoa costs. However, volume experienced a slight dip of around 8%.

Management is acutely aware that North American consumers are value-conscious and selective with their discretionary spending. While cocoa prices have plummeted far below their late 2024 peaks, these cost reductions have not directly led to lower candy prices at retail outlets. Hershey has raised its 2026 adjusted EPS outlook to $8.36 - $8.52, and Q3 EPS growth could be quite impressive.

Despite the potential impact of El Niño on cocoa prices and harvests, strong volume stabilization and careful price balancing among price-sensitive consumers could result in a profitable Halloween season for investors. However, persistent volume declines, additional tariffs, or El Niño complications could tarnish the stock performance for some time.

Hershey's shares have declined by approximately 12% over the past year, and its forward price-to-earnings ratio currently stands at about 17. The stock seems reasonably priced, and the author expresses a cautiously optimistic stance, acknowledging the broader macroeconomic risks involved. The Motley Fool offers additional investment insights and services.