Hershey Exceeds by a Penny - Analyst Blog
July 26 2011 - 9:06AM
Zacks
The Hershey Company (HSY) has posted adjusted
quarterly earnings of 56 cents a share in the second-quarter 2011
financial results, which slightly exceeded the Zacks Consensus
Estimate of 55 cents. It also surpassed the prior-year adjusted
earnings of 51 cents per share.
On a reported basis, earnings for the quarter came in at 56
cents, up from 20 cents per share delivered in the year-ago
quarter.
The adjusted earnings in the second quarter of 2011 exclude
credits related to the Project Next Century program announced in
June 2010. The results also exclude pre-tax charges of $9.4
million, or 2 cents per share, more than offset by an adjustment of
$11.2 million, or 2 cents a share, resulting in a net credit of
$1.8 million due to a reduction of previous estimates.
The prior-year quarter excludes net pre-tax charges of $86.2
million, or 31 cents per share, comprised of Project Next Century
costs of $41.5 million, or 11 cents, and a non-cash goodwill
impairment charge of $44.7 million, or 20 cents related to the
Godrej Hershey Ltd. joint venture in India.
Management expects its total pre-tax GAAP charges and
non-recurring project implementation costs related to the Project
Next Century program to be $140 million to $160 million for
2011.
In 2011, Hershey’s expects to record total GAAP charges of about
$38 million to $43 million, or 11 to 12 cents per share,
attributable to charges associated with Project Next Century.
The company thus expects its reported earnings per share,
including business realignment and impairment charges of 11-12
cents per share, to be in the $2.67 to $2.71 range in 2011.
Further, Hershey’s expects its 2011 earnings per share to be
greater than the company’s long-term 6% - 8% objective and increase
around 10% in 2011 owing to strong first-half performance, solid
in-store merchandising and seasonal programming.
Quarter in Detail
Exceeding the initial expectations, Hershey’s net sales of $1.33
billion rose 7.5% from the prior-year quarter, buoyed by volume in
new products both domestically and internationally, along with
early shipments to customers. Net price realization, primarily in
the U.S., added 3 point to the sales, while foreign currency
exchange rates contributed about a half point.
Quarterly sales were well ahead of the Zacks Consensus Revenue
Estimate of $1.28 billion.
Management ramped up its advertising spending by 8% in the
second quarter of 2011. This is in-line with the mid-single digit
percentage increase forecasted for 2011.
Hershey’s adjusted gross margin for the quarter contracted 130
basis points (bps) to 43.1% as net price realization and supply
chain efficiencies and productivity were more than offset by higher
input costs. Adjusted operating margin was same at the level of
17.1% in the second quarter of 2011.
Management expects to continue to increase U.S. market share in
the third quarter of 2011. Thus the company expects U.S. CMG
category growth to be within the 3%-4% growth rate.
Hershey’s also expects its advertising expense to increase
mid-single digits on a percentage basis in 2011 versus last year,
supporting new product launches and core brands in both the U.S.
and international markets.
Consequently, the company expects 2011 net sales, including the
impact of foreign currency exchange rates, to be greater than the
long-term 3% - 5% objective and increase around 6%.
Other Financial Details
Hershey ended the quarter with cash and cash equivalents of
$790.3 million, long-term debt of $1.54 billion, and shareholders’
equity of $1.05 billion.
Based in Pennsylvania, Hershey engages in manufacturing,
marketing, selling, and distributing various chocolate and
confectionery products, pantry items, and gum and mint refreshment
products worldwide. It competes with Kraft Foods
Inc. (KFT) which will report its second quarter 2011
earnings on August 4.
HERSHEY CO/THE (HSY): Free Stock Analysis Report
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