The Hershey Company
HSY · NYSE
Next quarter
Reports Oct 29, 2026.
Consensus is $2.11 EPS for Sep 2026 across 8 estimates, ranging $2.04 to $2.23.
HSY Jun 2026
- 31.03%
- -1.23%
- $1.45
- $1.90
- —
- $2.79B
Reported results
- $2.79B
- 45.32%
- $642.64M
- 23.06%
- $457.67M
Highlights
- Earnings beat: Adjusted EPS was $1.90, 31.0% above the $1.45 consensus; reported diluted EPS was $2.26 versus $0.31 a year ago.
- Margin recovery: Adjusted gross margin expanded 350 basis points to 41.6%, while adjusted operating margin rose 450 basis points to 20.2%; adjusted operating profit increased 37.3% to $563.5 million.
- Pricing versus volume: Net sales increased 6.6% to $2.79 billion, but organic constant-currency growth was 3.6%, driven by roughly 12 points of price realization against an 8-point volume decline.
- Confectionery performance: North America Confectionery sales grew 4.2% to $2.17 billion and segment income rose 40.1% to $705.8 million, though volume fell roughly 10 points and CMG share declined.
- Salty Snacks acquisition: North America Salty Snacks sales rose 22.9% to $387.8 million, with LesserEvil contributing approximately 22 points of growth; segment income fell 5.9% to $62.6 million as margin declined to 16.1%.
- International weakness: International sales increased 5.7% to $225.9 million on pricing, but volume fell roughly 8% and segment income swung to a $5.1 million loss from $19.8 million of income.
- Full-year outlook: Hershey raised the low end of its sales and earnings ranges, now targeting reported sales growth of 4.5%-5.0%, organic growth of 3.0%-3.5% and adjusted EPS growth of 32.5%-35.0%.
- Cash and capital allocation: First-half operating cash flow rose to $888.1 million from $508.9 million, while the company paid $574.4 million in dividends and repurchased $439.4 million of stock.
Analysis
Hershey’s second quarter was a strong earnings-recovery print, with adjusted EPS of $1.90 beating the $1.45 consensus by 31.0%. Revenue of $2.79 billion rose 6.6% from $2.61 billion a year ago but declined from $3.10 billion in the first quarter, consistent with seasonal patterns. Operating income increased to $642.6 million from $192.8 million last year and was broadly stable versus $640.7 million in Q1; net income rose to $457.7 million from $62.7 million and increased from $435.1 million sequentially.
The main story was pricing-led sales growth converting into materially better profitability as commodity costs, productivity savings and favorable derivative comparisons supported margins. Adjusted gross margin improved to 41.6% from 38.1%, and adjusted operating margin reached 20.2% versus 15.7% a year ago. The trade-off was consumer elasticity: organic growth was only 3.6% after 12 points of pricing and an 8-point volume decline. North America Confectionery delivered the core profit recovery, while Salty Snacks added acquisition-driven sales but lower profit, and International deteriorated into a loss. Management narrowed the full-year framework while lifting its lower bounds, including adjusted EPS growth of 32.5%-35.0%, excluding potential tariff rebates.
Margin recovery
Profitability improved sharply against a weak year-ago comparison, although reported results benefited from commodity derivative movements. Reported gross margin rose to 45.3% from 30.5%, helped by $102.9 million of derivative mark-to-market gains versus $200.7 million of losses in the prior-year quarter. On a more comparable basis, adjusted gross margin increased 350 basis points to 41.6% as pricing, lower net commodity costs and productivity savings more than offset logistics costs and unfavorable mix. Adjusted operating profit grew 37.3% to $563.5 million, with adjusted operating margin up 450 basis points to 20.2%.
- Operating expenses: SM&A expense increased 2.9% to $620.6 million, including a 6.0% increase excluding advertising and consumer marketing, reflecting capability and technology investments.
- Tax benefit: The adjusted effective tax rate declined to 24.2% from 32.8%, while the reported rate fell to 22.2% from 57.9%, partly because of a prior-year tax reserve increase and derivative-related foreign rate effects.
- Comparability: Q2 2026 included $79.1 million, or $0.36 per diluted share, of negative comparability items, while Q2 2025 included $217.7 million, or $0.90 per share, of positive items.
Pricing and elasticity
The quarter demonstrated both the power and the cost of Hershey’s pricing actions. Reported sales rose 6.6% to $2.79 billion, while organic constant-currency sales rose 3.6%. Approximately 12 points of organic price realization more than offset an 8-point volume decline. The volume pressure was concentrated in North America Confectionery and International, indicating that the sales recovery is not yet volume-led.
- U.S. confectionery: CMG retail takeaway increased 3.7% in the 12 weeks ended July 19, but Hershey’s CMG share declined because of competitive innovation.
- Broader U.S. trends: First-half U.S. CMG takeaway increased 2.7% despite share loss, while total U.S. retail takeaway for the combined portfolio increased 4.4%.
- Brand investment: Advertising and consumer marketing expense declined 3.3% in the quarter because of efficiencies and timing, even as management said it intends to increase investment behind brands, merchandising and innovation in the second half.
Segment divergence
The operating segments produced a mixed quarter. North America Confectionery supplied most of the earnings recovery, Salty Snacks delivered acquisition-led growth without profit growth, and International absorbed cost and demand pressure.
- North America Confectionery: Sales rose 4.2% to $2.17 billion on approximately 14 points of pricing and a roughly 10-point volume decline. Segment income increased 40.1% to $705.8 million, lifting margin to 32.5% from 24.2% on pricing, lower commodity costs, productivity and tariff refunds.
- North America Salty Snacks: Sales increased 22.9% to $387.8 million, with LesserEvil contributing approximately 22 points. Organic sales rose only 0.6%; volume increased roughly 4 points but pricing was a 3-point headwind. Segment income declined 5.9% to $62.6 million and margin fell 500 basis points to 16.1%.
- International: Sales grew 5.7% to $225.9 million on approximately 10 points of pricing, partially offset by an 8-point volume decline. Segment income fell to a $5.1 million loss from $19.8 million of income as commodity, manufacturing and advertising costs increased.
Full-year outlook
Hershey narrowed its 2026 ranges while raising the lower ends, signaling confidence that first-half pricing, productivity and cost improvements can support its commitments despite elasticity and dynamic trade conditions. The outlook excludes potential future tariff rebates.
- Sales: Reported net sales growth is now expected at 4.5%-5.0%, versus 4.0%-5.0% previously; the range includes an approximately 150-basis-point benefit from the LesserEvil acquisition.
- Organic growth: Organic net sales growth is now expected at 3.0%-3.5%, versus 2.5%-3.5% previously.
- Earnings: Reported EPS growth is guided to 82%-89%, versus 79%-89% previously, while adjusted EPS growth is expected at 32.5%-35.0%, versus 30%-35% previously.
- Investment and savings: Capital expenditures remain planned at $425 million-$475 million, with approximately $100 million of Advancing Agility & Automation savings expected in 2026.
Cash and capital allocation
Cash generation improved materially in the first half, but seasonal working capital and shareholder returns kept financing cash flow negative. Operating cash flow was $888.1 million versus $508.9 million a year ago, while cash ended June at $791.2 million, down from $925.9 million at year-end.
- Share repurchases: Hershey spent $439.4 million on repurchases in the first half, including $200.0 million under the authorized program and $239.4 million to replace shares issued for compensation; approximately $270 million remained under the prior authorization at quarter-end.
- New authorization: The board approved an additional $500 million repurchase authorization in June 2026, which begins after the existing authorization is completed.
- Debt: Total short- and long-term debt was approximately $5.6 billion, including $500 million of 2.3% notes maturing August 15, 2026; management expects to address the maturity with operating cash flow, new debt and/or its $1.875 billion revolving credit facility.
