The Hershey Company (HSY) Q3 2024 [Q&A] earnings summary

Executive summary

• Management expects top-line growth in line with the long-term 2–4% algorithm for 2025, with pricing similar to 2024 and historical elasticity assumptions maintained.

• Q3 2024 net sales declined 1.4% year-over-year to $2,987.5 million, with organic constant currency sales down 1.0%.

• Net income for Q3 2024 was $446.3 million, down 12.7% year-over-year; EPS-diluted was $2.20, down 12.7%.

• Results were impacted by high cocoa prices, lower volumes, and increased business realignment costs.

• 2026 could see outsized growth if cocoa prices stabilize or decline, with confidence in meeting or exceeding the long-term growth algorithm.

Financial highlights

• Gross margin for Q3 2024 was 41.3%, down from 44.9% in Q3 2023; adjusted gross margin at 40.3%.

• Operating profit for Q3 2024 was $613.2 million, down 16.7% year-over-year; adjusted operating profit was $654.0 million.

• High single-digit COGS inflation in 2024, with a significant step-up expected in 2025, primarily due to cocoa and sugar costs.

• Net interest expense increased 11.5% in Q3, driven by higher short-term debt balances.

• Cash from operations for the nine months was $1,590.0 million, up $24.4 million year-over-year.

Outlook and guidance

• 2024 net sales growth guidance reduced from ~2% to flat; reported EPS growth revised from (3)%–(1)% to (9)%–(6)%.

• Pricing for 2025 is expected to be in the low to mid-single-digit range, similar to 2024, as price increases flow through about half of chocolate pounds.

• Productivity and cost savings programs are expected to deliver $130–$140 million in continuous improvement and additional savings from the AAA Program.

• Capital expenditures for 2024 expected at $575–$600 million, focused on capacity and digital infrastructure.

• Fewer headwinds are anticipated in 2025, including the exit from the Mexico drink business and improved performance in SkinnyPop and innovation.