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Lauren Larson/MEDILL

Hershey Co. is looking ahead to Valentine's Day, anticipating a good first quarter.

Hershey profit and sales exceed expectations in sweet fourth quarter

by Lauren Larson
Jan 30, 2014

Strong holiday and international sales sweetened Hershey Co.’s fourth-quarter bottom line. In spite of a volatile cocoa market in 2013, earnings for the maker of brands such as Hershey’s Kisses, Reese’s and Twizzlers increased by more than 20 percent.

In the quarter ended Dec. 31, Hershey earned $186.1 million, or 82 cents per share, up 24 percent from $149.9 million, or 66 cents per share, during the same period in 2012. Hershey’s earnings were in line with estimates from analysts surveyed by Bloomberg.

Sales rose 11.7 percent in the final quarter to $1.96 billion from $1.75 billion, in large part due to a robust holiday season. Because of heightened demand last quarter, Hershey had to buy some of its cocoa on the spot market, which increased costs.

In a conference call Thursday, Mark Pogharian, Hershey’s vice president of investor relations, explained that last quarter’s slightly disappointing gross margin was the result of that.

In spite of the unanticipated extra cost, analyst Jack Russo of Edward Jones said Hershey enjoyed fairly low costs on its core commodities last quarter.

“They’re getting a break right now on costs. Sugar and cocoa have been very accommodating for them. Dairy has been rising, so we’ll have to keep an eye on that,” Russo said.

Pogharian also discussed Hershey’s plans to acquire Chinese candy maker Shanghai Golden Monkey as part of efforts to develop a stronger presence in the growing Chinese market. Hershey is not expected to close on that acquisition until late spring, but even so, international operations accounted for one-third of volume growth in the last quarter.

“In 2013 Hershey was the fastest growing chocolate company in China,” Pogharian said. “Its consumers responded to Hershey’s advertising and products such as Hershey’s Drops and Kisses Deluxe.”

Russo, who currently has a sell recommendation on Hershey shares, was impressed by the company’s sales growth and new projects. Hershey recently released a new line of flavored chocolate spreads and announced a plan to bring Jolly Ranchers hard candy to India.

“They’re just doing a really good job introducing new products. They have a very strong dollar spend, and they’re getting a good return on that,” Russo said, adding, “I enjoy all of their products, unfortunately.”

For all of 2013, Hershey earned $820.5 million, or $3.61 per diluted share, up 24 percent from $660.9 million, or $2.89 per share, in 2012. Sales rose 8 percent, to $7.1 billion from $6.6 billion, prompting several analysts to upgrade their recommendations.

Hershey shares closed Thursday at $99.25, up by $2.53, or 2.6 percent.