Hershey Q2 Adj. EPS Beats Estimates Amid Weak China

(RTTNews) - Chocolate maker Hershey Co. (HSY) Friday reported a loss for the second quarter, compared to a profit last year, hit by charges as well as weak performance in China. Adjusted earnings topped Wall Street estimates, but revenues fell short of expectations. Further, the company confirmed its earnings forecast for the year, but lowered its sales expectations.

John Bilbrey, chairman, president and CEO, said, "Second quarter operating results were largely in line with our revised expectations, particularly in the North America business where we continue to build on our momentum."

The company said the results were adversely impacted by international performance, primarily in China, where macroeconomic challenges and changing consumer shopping behavior were a headwind. Over the remainder of the year the company is optimistic that its core brand and new product initiatives in both North America and international markets will drive growth.

Net loss for the second quarter was $99.9 million or $0.47 per share, compared to net income of $168.2 million or $0.75 per share in the prior-year period.

The latest results included $1.23 per share in charges, including a $1.13 per share non-cash goodwill impairment charge related to the Shanghai Golden Monkey or SGM business.

Adjusted earnings per share were $0.78, while it totaled $0.76 per share last year. On average, 15 analysts polled by Thomson Reuters expected earnings of $0.75 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated net sales were $1.579 billion, compared with $1.578 billion for the second quarter of 2014. Analysts expected revenues of $1.62 billion.

Price realization, primarily in the U.S., was a 5.8 point benefit to sales. Volume was off 3.6 points due primarily to elasticity related to the previously announced price increase, in line with expectations and lower sales in China.

Hershey's North America net sales grew 1.8 percent to $1.4 billion in the second quarter. According to the company, on a net basis, the Allan Candy and Krave acquisitions, as well as the Mauna Loa divestiture, were a 0.5 point benefit.

Meanwhile, net sales for Hershey's International and Other segment declined 12.1 percent to $179.3 million, due primarily to net sales of chocolate in China, which declined about $35 million.

Additionally, the Board of Directors declared a quarterly dividend of $0.583 on the Common Stock, an increase of about 9 percent.

Over the remainder of the year, net sales are expected to be driven by strong Halloween and Holiday seasonal programming and the continued rollout of new products in North America, including, Kit Kat White Minis, Hershey's Caramels and Ice Breakers Cool Blasts Chews.

For the full year, the company still expects adjusted earnings per share to be in the range of $4.10 to $4.18 range, an increase of 3 to 5 percent from 2014, including dilution from acquisitions and divestitures of around $0.20 per share. Analysts look for earnings of $4.15 per share for the year.

Hershey estimates full-year 2015 net sales will increase 1.5 to 2.5 percent, including a net benefit from acquisitions and divestitures of about 1 percentage point and unfavorable foreign currency exchange of approximately 1.5 percentage points.

Excluding unfavorable foreign currency exchange rates, full-year net sales are expected to increase 3 to 4 percent.

In June, the company projected adjusted earnings of $4.10 to $4.18 per share and sales growth of 2.5 percent to 3.5 percent.

HSY closed down 0.5 percent on Thursday at $92.20.