Hershey Company (HSY) EPS visibility is limited despite strong Q1 results and unchanged fiscal 2025 guidance due to high cocoa inflation and muted market share trends amid tariff-driven uncertainty, Morgan Stanley said in a Thursday report.
The company expected tariff impacts of up to $100 million quarterly in H2 on an unmitigated basis, according to the note.
The brokerage said it is of the view that investors will likely stay skeptical of the company's ability to implement additional pricing amid ongoing market share weakness and high valuation, which is expected to collectively limit the stock.
The company estimates gross margin to fall 700bps in Q2 as it expects more of its hedges to be applied to Q3 shipments. Hence, gross margin performance will likely decline sequentially and put pressure on earnings, according to the note.
The brokerage said it reduced its fiscal 2025 EPS estimate to $6.02 from $6.07 and 2026 estimate to $6.36 from $6.47 earlier, reflecting looming uncertainty.
Morgan Stanley said it reiterated its equal weight rating on the stock and cut its price target to $173 per share from $177 earlier.
Shares were down 3.2% in recent trading.
Price: 161.78, Change: -5.35, Percent Change: -3.20
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