Hershey Reports In-Line - Analyst Blog

The Hershey Company (HSY) has posted fourth-quarter and full fiscal 2010 financial results. The adjusted quarterly earnings of 61 cents a share remained in line with the Zacks Consensus Estimate, but was down 3.2% from 63 cents earned in the prior-year quarter.

On a reported basis, earnings for the quarter came in at 59 cents, up 7.3% from 55 cents delivered in the year-ago quarter.

For the full year, the company reported adjusted earnings of $2.55 a share which was up 17.5% versus 2009. Full year earnings were also in line with Zacks Consensus Estimate.  

A Look at the Top Line

Despite economic woes, Hershey sustained its top-line momentum with consumers preferring moderately priced candies compared to premium ones. Net sales of $1,482.8.1 million rose 5.4% from the prior-year quarter, buoyed by volume, along with fast-paced growth in emerging markets. Foreign currency translation favorably impacted sales by 0.6%.

Quarterly sales were well ahead of the Zacks Consensus Revenue Estimate of $1,473 million.

Annual revenues were up 7.0% to $5,671.0 million, year-over-year and were well ahead of the Zacks Consensus Estimate of $5,664 million.

Management ramped up its advertising spending for the quarter and fiscal 2010. For the fourth quarter, advertising expense increased 85% while for full year expense increased 62%.

Margin Expansion

Hershey's adjusted gross margin for the quarter expanded 150 basis points (bps) to 42.2%, reflecting increase in productivity and favorable sales mix, partially offset by a rise in marketing and selling expenses. For the year, adjusted gross margin increased 390 bps.

Management now expects adjusted gross and operating margins to increase in fiscal 2010 on the back of effective cost management. The growing sales as well as margin expansion prompted management to lift its bottom-line outlook.

Other Financial Details

Hershey ended the quarter with cash and cash equivalents of $884.6 million, long-term debt of $1,541.8 million, reflecting a debt-to-capitalization ratio of 62.2%, and shareholders' equity of $937.6 million.

Dividend Increase

On January 31, 2011, the Board of Directors increased the quarterly dividend by 7.8% to $0.345 per share on the Common Stock. In addition, the Board also declared a dividend of $0.3125 on the Class B Common Stock, reflecting an increase of $0.0225 per share. The dividends are payable on March 15, 2011 to shareholders on record as of February 25, 2011.