A Sweet One to Watch

Amy is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

With an $80 billion snack market and confectionery taking 41% of the market segment, U.S. confections are attractive. The Hershey Company (NYSE: HSY) was chosen as InvestorPlace‘s Ten Best Stocks for 2012, and there are several reasons why you should keep an eye on this sweet company.

The Hershey Company is the largest producer of quality chocolate in North America and a global leader in chocolate and sugar confectionery. Headquartered in Hershey, Pa., The Hershey Company has operations throughout the world and approximately 14,000 employees. With revenue of more than $6 billion, Hershey offers confectionery products under more than 80 brand names, including such iconic brands as HERSHEY'S, REESE'S, KIT KAT, TWIZZLERS, JOLLY RANCHER and ICE BREAKERS.

Forbes ranked the Hershey 61stin the World's Most Powerful Brands. The company is focused on growing its presence in key international markets such as China and Mexico while continuing to build its competitive advantage

Markets in China, India and other developing countries also present a big opportunity for Hershey's. Chocolate sales in China have doubled to $813 million over the last five years while India's chocolate sales have risen 64% over the same period.

In April 2010, Hershey's announced plans to open its first store in Singapore and plans to open six additional stores there within three years. The company is also looking into expansion opportunities in Indonesia, Malaysia, and Thailand, with each country eventually supporting four to six stores.

In January 2012, the Company acquired a 69% interest in Tri-Us, a company that manufactures, markets and sells nutritional beverages under the mix1 brand name. The acquisition was meant to help Hershey’s own efforts at making a cocoa-based protein drink called reGen.

Hershey leads the U.S. chocolate industry with 43% share with Mars at 30% market share. Nestle comes in at a far third place at just a 6% share. It’s the largest and most profitable segment in the world.

On Oct. 25, 2012, Hershey announced a quarterly dividend on the common stock of 42 cents per share. Hershey paid out $1.56 for fiscal year 2012. The company aims to increase net sales by more than half their current level, to hit $10 billion by the end of 2017. Hershey grew net sales by 7.5% in 2012 and adjusted earnings per share are expected to grow 14-15%.

Its long-term financial strategies and objectives include:

  • Net sales – 5-7%
  • Earnings per share – 8-10%
  • Dividend payout ratio – about 50%
  • Total shareholder return – increase 10-12%

Competition

Mars is Hershey's closest competitor, owning brands such as Mars, Snickers, M&M's, Milky Way and Twix. In April 2008, Mars announced the $23 billion acquisition of Wrigley, which creates a sweet giant combining many stable brands with global distribution.

The bottom line

Shares are now up more than 19% in the past 12 months, and their momentum keeps building. My advice? Keep holding or purchase now if you haven't already done so.


HalfPint007 has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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