Stock Analysis & Valuation The Hershey Company (0J4X.L)

• Previous Close: £193.26
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	98.90	-49
Intrinsic value (DCF)	103.91	-46
Graham-Dodd Method		n/a
Graham Formula	70.90	-63

Strategic Investment Analysis

Company Overview

The Hershey Company (LSE: 0J4X.L) is a global leader in confectionery and snack production, renowned for its iconic brands such as Hershey's, Reese's, and Kit Kat. Headquartered in Hershey, Pennsylvania, the company operates across three key segments: North America Confectionery, North America Salty Snacks, and International. Hershey's diverse product portfolio includes chocolate and non-chocolate confectionery, gum and mint refreshments, pantry items, and snack products, catering to a broad consumer base. With a strong presence in the U.S. and international markets, Hershey distributes its products through various channels, including grocery stores, mass merchandisers, and convenience stores. Founded in 1894, Hershey has built a legacy of quality and innovation, supported by brands like Twizzlers, SkinnyPop, and ONE Bar. The company's commitment to sustainability and consumer satisfaction positions it as a resilient player in the Consumer Defensive sector, with a market capitalization exceeding $30 billion.

Investment Summary

The Hershey Company presents a stable investment opportunity within the Consumer Defensive sector, supported by its strong brand equity, diversified product portfolio, and consistent financial performance. With a market cap of $30.75 billion and a beta of 0.305, Hershey exhibits lower volatility compared to the broader market, appealing to risk-averse investors. The company reported robust revenue of $11.2 billion and net income of $2.22 billion in the latest fiscal year, with diluted EPS of $10.94. Hershey's operating cash flow of $2.53 billion underscores its operational efficiency, while a dividend per share of $5.48 highlights its shareholder-friendly approach. However, investors should monitor rising total debt ($5.45 billion) and competitive pressures in the confectionery and snack markets. Hershey's international expansion and innovation in healthier snack options could drive future growth.

Competitive Analysis

The Hershey Company holds a dominant position in the confectionery and snack industry, leveraging its strong brand portfolio and extensive distribution network. Its competitive advantage stems from iconic brands like Hershey's and Reese's, which enjoy high consumer loyalty and recognition. Hershey's diversified product range, spanning chocolates, gums, and salty snacks, allows it to cater to varying consumer preferences and mitigate segment-specific risks. The company's focus on innovation, such as healthier snack alternatives under brands like Lily's and ONE Bar, aligns with evolving consumer trends toward wellness. However, Hershey faces intense competition from global players like Mondelez and Mars, which have broader international footprints. In the salty snacks segment, Hershey competes with PepsiCo's Frito-Lay, which dominates with brands like Lay's and Cheetos. Hershey's acquisition of brands like SkinnyPop and Dot's Homestyle Pretzels strengthens its position in the premium snack category but requires continued investment to sustain growth. The company's ability to maintain pricing power and expand in emerging markets will be critical to its long-term competitiveness.

Major Competitors

• Mondelez International (MDLZ): Mondelez is a global leader in snacks and confectionery, with brands like Oreo, Cadbury, and Toblerone. Its extensive international presence gives it an edge over Hershey in emerging markets. However, Mondelez faces challenges in maintaining growth in saturated markets and relies heavily on cost-cutting measures to boost margins.
• PepsiCo (PEP): PepsiCo dominates the salty snacks segment with Frito-Lay brands (Lay's, Doritos) and has a robust beverage portfolio. Its diversified revenue streams provide stability, but Hershey's focus on confectionery allows for deeper brand penetration in that niche. PepsiCo's scale and distribution network are unmatched, but it faces pressure from health-conscious consumers.
• The Hershey Company (US Listing) (HSY): Hershey's primary listing on the NYSE (HSY) reflects its strong U.S. market presence. The company excels in chocolate confectionery but competes with its own international segment for growth. Its dual listing on the LSE (0J4X.L) provides additional liquidity but does not significantly alter its competitive positioning.
• Nestlé (NSRGY): Nestlé is a diversified food and beverage giant with confectionery brands like Kit Kat (licensed from Hershey in the U.S.). Its global scale and R&D capabilities are strengths, but Hershey's deeper focus on confectionery gives it an edge in product innovation and brand loyalty in North America.
• Mars, Incorporated (Private): Mars is a privately held competitor with iconic brands like M&M's, Snickers, and Skittles. Its lack of public disclosures makes direct comparisons challenging, but Mars's global reach and marketing prowess pose significant competition to Hershey, particularly in international markets.