23 April 2020

Can Hershey’s Sweeten Market Sentiment with Q1 Print?

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What’s happening: The Hershey Company is set to report its first-quarter results before the opening bell on Thursday, April 23.

What happened: At a time when the estimates for most companies are being revised lower, the chocolate giant has seen mostly upward revisions by analysts over the past three months.

Investors are optimistic heading into Hershey’s quarterly release, expecting the company to report both sales and earnings growth. The chocolatier has witnessed some disruption in its business due to coronavirus outbreak, but there’s been a surge in demand for its products so far.

  • The consensus revenue estimate stands at $2.09 billion, representing 3.5% year-on-year growth.
  • The company is expected to report earnings of $1.71 per share, representing a 7.5% increase versus the same quarter last year.

Why it matters: The coronavirus pandemic has had a mixed effect on the company’s business. On one hand, manufacturing is now closed, while on the other, there’s been a spike in demand.

With customers stocking up on various snacks to pamper their taste buds during the lockdowns, Hershey’s is likely to continue to witness a rise in the demand for its products. The company is expected to report healthy sales figures for the latest quarter, surpassing the 1.8% organic growth that it achieved in 2019.

Demand for the company’s staples has surged at various supermarkets. Moreover, the acquisition of Pirate Brands has been benefitting Hershey’s snacks business. With the portfolio now including salty snacks, the variety being offered now could support the company’s market share during this crisis period.

How the shares have performed so far: Shares of Hershey’s have been on an upturn over the past month, climbing around 22%. Since the start of the year, the stock has declined only around 2.5%, reflecting limited impact of coronavirus fears. The confectioner’s shares rose 1.2% to close trading at $143.28 yesterday.

What to watch: Hershey’s had around $500 million in cash at the end of 2019, which provides it with a cushion during these challenging times. Investors await details from management about the company’s financial condition and plans to preserve liquidity. The company is expected to issue its sales forecast for the current quarter and year. Investors will also look out for news around whether Hershey’s is able to meet consumer demand amid shutdowns.

The Markets Today

     

Investors will be watching European stocks, ahead of major economic reports scheduled for release later in the day.

Context: European stocks closed higher on Wednesday, with a recovery in crude oil prices. Positive earnings results from some major companies also helped lift market sentiment.

Details: Markets were rattled at the start of the week when WTI crude oil prices for May delivery tanked into negative territory. Since then, oil prices have made a sharp recovery, climbing 23% in yesterday’s session. Brent crude also rebounded yesterday after hitting its 1999 low level in the previous session.

Investors also cheered the strong earnings results reported by different companies. Swiss healthcare giant Roche posted sales growth for the first quarter, while electronics and semiconductor manufacturer STMicroelectronics recorded both sales and earnings growth.

Shares of Akzo Nobel surged 7% after the Dutch company beat earnings expectations for the first quarter. CRH’s stock climbed around 5% after the Irish company reported 3% growth in its quarterly same-store sales and announced plans to pay a dividend.

The Stoxx Europe 600 index climbed 1.8% on Wednesday, after posting a decline of 3.4% the previous day. The German 30 index rose 1.6%, while the FTSE 100 closed higher by 2.3%.

In economic news, UK’s Office for National Statistics reported a decline in inflation to 1.5% in March, from 1.7% in February.

What to watch: Investors will be closely assessing the daily coronavirus numbers. The number of positive COVID-19 cases in Spain has surpassed 208,380 with around 21,710 deaths. Cases in Italy have exceeded 187,320, while France has confirmed more than 157,130 coronavirus cases.

Markets also await manufacturing and services PMIs reports from the Eurozone. The IHS Markit Eurozone manufacturing PMI is expected to decline to 39.2 in April, versus a revised reading of 44.5 in March. Services PMI is likely to fall further to 23.8 in April, from the previous reading of 26.4. The Eurozone composite PMI, which hit a record low of 29.7 in March, is expected to decline again to 25.7 in April.

Other Markets: US indices closed higher on Wednesday, with the Dow, S&P 500 and Nasdaq 100 up by 1.99%, 2.29% and 2.81%, respectively.

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What else to watch today

     

UK’s public sector net borrowing, CBI industrial trends orders, business confidence, manufacturing and services PMI, France’s business confidence, manufacturing and services PMI, Germany’s manufacturing and services PMI, Russia’s producer prices and GDP, Argentina’s consumer confidence and retail sales, Mexico’s retail sales as well as the US initial jobless claims, new home sales, natural gas stocks change and manufacturing and services PMI.

 

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