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Investment Analysis Clubs / The BMW Method
|Subject: Hershey... getting sweet?||Date: 7/19/2007 11:56 AM|
|Author: Fafar||Number: 25735 of 41726|
I've had Hershey (HSY) on my watchlist for a while, per instructions from my daughter the candy junkie. She has some cash in her account waiting for a good buy on something she's interested in. Starbucks (SBUX) is also on the watchlist.
Apparently the street is not too happy with HSY's reported earnings today since the stock's down $1.94 as I type, to $48. That was my target price to start looking at HSY.
The Hershey Co. earned $3.6 million, or a penny per share, for the three months ending July 1. That compares with a profit of $97.9 million, or 41 cents per share, in the same period a year earlier.
Not counting what Hershey spent on changes to its production and supply chain, the company's profit would have been $81.7 million, or 35 cents a share, matching the consensus estimate of analysts surveyed by Thomson Financial.
Performance was mixed in the quarter, with improving sales of dark and premium chocolate and some core brands offset by sluggish sales of other products, the company's chairman and CEO Richard H. Lenny said.
"The company's performance during the first half is not what we've come to expect or what we're capable of delivering," Lenny told analysts on a conference call. "We've completed a detailed assessment of what's working and what's not, and are making the appropriate shifts in plans and execution."
I calculate HSY's 22-yr curr cagrs at 14.72% dividend-adjusted or 15.65% non-div adjusted. 30-yr non-div adjusted = 16.84%. (Closed 7/77 at $.45; 7/85 at $1.97 according to ProphetCharts data but 7/85 at $2.34 according to Yahoo.)
It's sitting lower than its lowest CAGR according to GrahamInv's chart, but would only hit -2 RMS at $44.43 according to Sheridan's spreadsheet (avg cagr 12.21%/curr cagr 11.09%)
The stock price has been dropping since 5/05 from its high of $64.13 and today's big drop might start another selloff to take it to Sheridan's low.
As for catalysts to send it back up, the end of the article has a few to look into:
In February, Hershey announced a major restructuring designed to cut costs and excess production capacity in the United States and Canada, while expanding in Mexico, China and India, where labor is cheaper and Hershey hopes to sell more candy.
Since then, Hershey has announced it will close six U.S. and Canadian plants and cut more than 3,000 workers in the two countries, including up to 900 at its hometown plants. It has plans to shift more production to contractors and a new plant it is building in Monterrey, Mexico.
On Thursday, it said production is underway in China through a joint venture with South Korea's Lotte Confectionery Co. and its joint venture in India with Godrej Industries Ltd. is up and running.
The joint venture with Starbucks Coffee Co. is expected to put a Starbucks-branded line of premium chocolate in a wide range of retail outlets.
Has anyone else looked into HSY yet? Any thoughts on HSY vs SBUX?
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