Tigress Financial Partners Initiates Coverage On Hershey

Tigress Financial Partners initiated coverage on Hershey Co (NYSE: HSY) Tuesday with a Neutral rating.

Analyst Philip Van Deusen noted that “International opportunity in China is offset by input price headwinds and the competitive retail environment. Economic profit fundamentals are tapering off, an indication that shares price gains will be muted over the next twelve months.

“There is little room for multiple expansion as their EV / EBITDAR multiple of 10.9x is the highest it’s been in a decade. 2015 product launches, which feature releases such as the Reese’s Crunchy Cup and Brookside Crunchy Clusters, will be incremental sales and economic profit drivers.”

Van Deusen also called attention to “HSY’s return on capital [which] declined significantly from 25.8 percent to 21.3 percent although we are projecting a slight uptick to 23.5 percent over the next twelve months. Because of the above factors Economic Profit declined from $716.5 million to $688.0 million LTM and we are forecasting little change in Economic Profit over the NTM.”

“HSY is raising prices on non-seasonal everyday items and expects volume to fall accordingly. However, offsetting this trend is the oil dividend which should continue to benefit consumers, giving them more discretionary income and leading to an increase in demand for HSY’s products,” according to Van Deusen.

The analyst report concluded, “We would become more optimistic on HSY if the company can demonstrate its ability to execute on its growth strategy in China.”

Hershey recently traded at $97.29, up 0.82 percent.