Hershey Could Get Q3 Sugar Rush Thanks To A Cocoa Crash

Cocoa futures just crumbled to their lowest level since November, and while that may sting for West African farmers, it's great news for candy bar capitalists. Chief among the beneficiaries is The Hershey Company HSY.

Cocoa Cracks—Sweet News For Chocolate Titans

Hershey, which has seen its stock melt 11% over the past year as cocoa costs surged to record highs earlier in 2024.

But the tide may finally be turning. According to Barchart, the commodity just plunged below key technical support, driven by improving crop forecasts from top-producing regions and weaker speculative demand. With cocoa now back to eight-month lows, Hershey's third quarter gross margins could be getting a sugar boost, right on time.

Read Also: Hershey Stock Has Fallen Over The Past Month: What’s Going On?

Margins Could Sweeten Just As Volume Rebounds

Earlier this year, Hershey warned that sky-high cocoa prices were squeezing profits and forcing price hikes. That, in turn, put pressure on volumes, as inflation-weary consumers balked at $2 candy bars. But with cocoa costs now rapidly cooling, Hershey may have more wiggle room on pricing—and the chance to win back market share.

The broader confectionery sector has also been affected by cost inflation. Still, Hershey’s vertically integrated supply chain and brand dominance could enable it to capitalize on falling input prices more quickly than its competitors. If the company can hold the line on retail prices while benefiting from lower cocoa costs, third-quarter earnings could surprise to the upside.

Time To Unwrap Hershey Again?

Hershey stock may not look sweet on a one-year chart, but the commodity unwind could change the flavor fast.

With cocoa costs easing and consumer sentiment stabilizing, Hershey might finally get a break after months of margin pressure.

Investors seeking a defensive consumer name with a near-term catalyst may want to give this chocolate king another try.

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