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Hershey Media Report 7/26/16
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Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger
Jul 26, 2016 | Wall Street Journal
By Annie Gasparro
Rival snack makers Mondelez International Inc. and Hershey Co. are both expected to show continued sales pressure when they report quarterly earnings this week, bolstering some arguments that the two giants could benefit from joining forces. Mondelez made a bid to acquire Hershey at the end of June, and it was unanimously rejected by the chocolate company’s board of directors. But Mondelez, whose brands include Oreo cookies, hasn’t dropped its pursuit of Hershey, and could raise the offer if it sees an opening, two people familiar with the matter have said. -
Hershey (HSY) Stock Slumps as Deutsche Raises Price Target
Jul 26, 2016 | The Street
By Annie Palmer
Shares of Hershey (HSY) are declining 1.50% to $109.30 in late-afternoon trading today after Deutsche Bank upped its price target on the chocolate company's stock to $105 from $91. The firm maintained its "hold" rating on the stock due to continuing pressure in the U.S. confection and snacks markets. -
AG Reaches Settlement With Hershey Trust, Will Announce Soon
Jul 26, 2016 | 90.5 WESA Pittsburgh’s NPR News Station
By Katie Meyer
The state Attorney General’s office has reached a preliminary settlement with powerful multi-billion dollar foundation, the Hershey Trust. The office said an official announcement on the settlement could possibly come this week.
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Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger
Jul 26, 2016 | Wall Street Journal
By Annie Gasparro
Rival snack makers Mondelez International Inc. and Hershey Co. are both expected to show continued sales pressure when they report quarterly earnings this week, bolstering some arguments that the two giants could benefit from joining forces.
Mondelez made a bid to acquire Hershey at the end of June, and it was unanimously rejected by the chocolate company’s board of directors. But Mondelez, whose brands include Oreo cookies, hasn’t dropped its pursuit of Hershey, and could raise the offer if it sees an opening, two people familiar with the matter have said.
Wall Street will likely scrutinize comments by Mondelez Chief Executive Irene Rosenfeld,who is scheduled to speak to with analysts on Wednesday, when the company is expected to report earnings. Ms. Rosenfeld is typically tight-lipped when it comes to acquisition activity, but ongoing pressure from activist investors could prompt her to share insight into Mondelez’s strategy.
Revenue is expected to be $6.34 billion, down 17% from the same period last year, according to consensus estimates from Thomson Reuters.
Both Mondelez and Hershey are grappling with changing consumer tastes toward healthier and more natural foods, and in some cases the trend has sent a few companies in search of deals that help them reduce overall costs.
Last year’s megamerger of Kraft Foods Group Inc. and H.J. Heinz Co. was intended to help the packaged food conglomerates save on overhead expenses, supply chain and distribution costs. The combined company, Kraft Heinz Co., has posted double-digit increases in profits in recent quarters, despite continued sales declines.
David Palmer, an analyst at RBC Capital Markets, said the appeal for Mondelez to buy Hershey lies in the money the combined company could save by pooling resources and ingredient purchasing.
Mondelez could also profit from expanding overseas the Hershey brands, which also include Reese’s peanut butter cups and Twizzlers, as they are heavily concentrated in the U.S.
“Many of Hershey’s brands have global brand recognition and distribution upside,” he said,
Others make the case that Mondelez shouldn’t further invest in sugary snacks in the slow-growing U.S. market, while noting that Hershey’s unique ownership structure, which gives final say to a charitable trust, makes a deal unlikely.
One of Mondelez’s biggest shareholders, Pershing Square, has said it is wary of a deal to buy Hershey, since the chocolatier is largely concentrated in the U.S., and an acquisition could derail Mondelez’s focus on cost-cutting.
“We do have a question as to what Hershey’s growth rate is in the future and whether it would be better for Mondelez to invest more in its emerging markets,” Pershing Square’sAli Namvar, a member of the investment team, said on a recent conference call.
Bernstein analyst Alexia Howard agreed that an acquisition of Hershey would be “strategically unsound” for Mondelez. “Our strongly held view that health and wellness trends will play a key part in the U.S. food industry’s future makes us naturally skeptical of this transaction,” she said.
Hershey has said its sales and profit for the year will be lower than expected as its chocolate bars struggle to compete with newer snacks like fruit-and-nut bars considered by many consumers to be healthier.
Analysts expect Hershey’s revenue to be up 2% at $1.61 billion, and earnings to be flat at 78 cents a share when the company provides its quarterly update on Thursday morning.
Shareholders of both Hershey and Mondelez have benefited from the latest deal talks. As of Tuesday afternoon trading, Hershey’s shares had risen 13% since news of the offer, while Mondelez’s shares have risen 5%.
However, the market could pull back if earnings don’t meet their targets or the companies further trim their outlooks for the year.
On Wednesday, Mondelez will likely provide updates on sales in China, Brazil and Russia, where its Cadbury chocolates and Prince cookies have taken a hit recently. Mondelez, with its vast global reach, has become a good indicator of disposable income in emerging markets.
Typically, snacks are considered an affordable indulgence, making them some of the last foods to be hurt by difficult economic times, Ms. Rosenfeld said in an April interview. Yet, the impact of economic uncertainty has now trickled down to the candy aisle.
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Hershey (HSY) Stock Slumps as Deutsche Raises Price Target
Jul 26, 2016 | The Street
By Annie Palmer
NEW YORK (TheStreet) -- Shares of Hershey (HSY) are declining 1.50% to $109.30 in late-afternoon trading today after Deutsche Bank upped its price target on the chocolate company's stock to $105 from $91.
The firm maintained its "hold" rating on the stock due to continuing pressure in the U.S. confection and snacks markets.
"Although management is taking logical steps to invest in emerging markets, we are fearful of downside EPS risk given near-term challenges," Deutsche Bank continued in an analyst note.
However, valuation has improved due to Mondelez's (MDLZ) recent $23 billion acquisition offer, the firm added.
Additionally, Hershey is slated to report second quarter earnings before Thursday's market open.
Analysts expect the company to post earnings of 78 cents per share on revenue of $1.61 billion. '
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate HERSHEY CO as a Buy with a ratings score of B. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
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AG Reaches Settlement With Hershey Trust, Will Announce Soon
Jul 26, 2016 | 90.5 WESA Pittsburgh’s NPR News Station
By Katie Meyer
The state Attorney General’s office has reached a preliminary settlement with powerful multi-billion dollar foundation, the Hershey Trust.
The office said an official announcement on the settlement could possibly come this week.
The trust is the largest shareholder in the Hershey Company.
It owns the Hershey Entertainment & Resorts Company and manages more than $12 billion in funds for the Milton Hershey School, which serves underprivileged children.
The investigation stemmed from alleged conflicts of interests for board members and overcompensation.
Attorney General spokesman Jeffrey Johnson declined to offer specific information on the results of the investigation, saying only that, “an agreement has been reached in principal, but nothing has been finalized at this point.”
Johnson did acknowledge, however, that this isn’t the first time the Hershey Trust has faced an investigation by the AG’s office.
“One division of our office is tasked with the essential mission of making sure that charitable assets are being used appropriately,” he said. “And we’ve worked with the Hershey Trust in the past, so this is a continuation of those efforts.”
In 2011, for instance, the office examined why the trust spent $17 million on a golf course and clubhouse.
The trust is supposed to only use its money to benefit the students who attend the Milton Hershey School.
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