Hershey Shares Slide Despite Strong Q3 Earnings and Revised Full-Year Guidance

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Hershey(NYSE: HSY) delivered a decisive earnings beat this morning, posting third-quarter results that significantly exceeded Wall Street expectations and prompted management to raise full-year guidance. The stock was up sharply in early trading on the strength of the numbers and the company's improved outlook, but since the open, shares are down.

Strong Execution Drives Upside

Hershey reported adjusted earnings per share of $1.30, beating consensus estimates of $1.06 by $0.24, or 22.6%. Revenue came in at $3.18 billion, topping the $3.12 billion estimate by $66 million. Both metrics signal that the company's innovation efforts and brand investments are resonating with consumers across its portfolio.

The beat came despite a challenging operating environment. CEO Kirk Tanner highlighted the performance in his opening remarks, noting that "strong innovation, strategic brand investments, and market leading execution drove momentum across business segments." That language matters. It tells you the company believes its strategy is working, not that it's simply benefiting from temporary tailwinds.

All three major business segments contributed to the upside. North America Confectionery, the company's largest division, grew 5.6% to $2.62 billion. North America Salty Snacks expanded 10% to $321 million. International revenue climbed 12.1% to $244.8 million, suggesting global demand remains solid despite economic uncertainty.

Margin Pressure Remains the Real Story

The headline beat masks a more complicated picture underneath. Gross profit declined 15.8% year over year to $1.04 billion, and gross margin contracted by 870 basis points. Operating income fell 29.1% to $434.6 million. Net income dropped 38.1% to $276.3 million.

This deterioration reflects what management flagged as headwinds: higher commodity costs and tariff pressures. Those aren't temporary. They're structural challenges that will persist through the remainder of the year and potentially into 2026. The company is managing volume growth and driving innovation, but it's doing so against a backdrop of rising input costs that are eroding profitability.

The fact that Hershey still raised full-year guidance despite these margin pressures is noteworthy. It suggests management believes volume momentum and pricing actions will be sufficient to offset cost inflation for the full year. Investors will want to see whether that confidence holds as the company moves through the holiday season.

Guidance Raise Signals Confidence

Management raised its full-year 2025 outlook, now expecting net sales growth of approximately 3% and adjusted earnings per share in the upper half of its previous range. That's a meaningful signal. Companies don't raise guidance lightly, especially in a volatile macro environment. The raise suggests Hershey's leadership believes the third-quarter momentum is sustainable and that the fourth quarter will hold up.

Story Continues

The Sour Strips acquisition, completed earlier this year, continues to contribute to growth. While the company didn't break out specific numbers for the acquisition's contribution, management's willingness to raise guidance indicates the brand is performing as expected within the portfolio.

Key Figures

Adjusted EPS: $1.30 (vs. $1.06 expected); up 22.6% Revenue: $3.18B (vs. $3.12B expected); up 2.1% Gross Margin: Declined 870 basis points year over year Operating Income: $434.6M; down 29.1% year over year North America Confectionery: $2.62B; up 5.6% North America Salty Snacks: $321M; up 10% International: $244.8M; up 12.1%

I'd focus on the revenue beat and segment performance. Volume growth across all three divisions is the foundation of this report. It shows the company is taking share and that consumer demand for its brands remains intact.

What Management Said

Tanner's remarks emphasized execution and innovation as the drivers of the quarter. He didn't dwell on cost pressures or paint a pessimistic picture of the consumer. Instead, the tone was one of operational confidence. The company believes it can navigate the current environment by continuing to invest in its brands and by maintaining pricing discipline.

That's important context. When management raises guidance in the face of margin headwinds, they're essentially telling you they believe pricing and volume gains will outpace cost inflation. It's a bet on their ability to execute, not a signal that external pressures are easing.

What Comes Next

The fourth quarter will be the real test. Holiday season performance typically represents the largest sales period for confectionery companies, and consumer spending patterns in that period will determine whether the company can deliver on its raised full-year guidance. Watch for any commentary during the earnings call about demand trends heading into the final weeks of the year and whether management sees any signs of consumer pullback as the holiday shopping season unfolds.

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