What Happened?

Shares of chocolate company Hershey (NYSE:HSY) jumped 6.9% in the pre-market session after the company reported strong fourth-quarter results, which blew past analysts' gross margin and organic revenue estimates. Looking ahead, Hershey expects at least 2% revenue growth in 2025, but earnings are projected to decline due to continued pressure from high cocoa prices and increased operating expenses​. Overall, we think this was a decent quarter with some key metrics above expectations.

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What The Market Is Telling Us

Hershey’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was about 2 months ago when the stock gained 16.4% after Bloomberg reported that Mondelez, the company behind Oreo cookies, is exploring a potential buyout of Hershey. Sources say the discussions are still in the early stages, and Mondelez may not make an offer. 

Hershey has a history of turning down acquisition attempts. In 2016, it rejected a $23 billion takeover bid from Mondelez. Had Hershey accepted, the deal would have formed the world's largest candy company. 

Most acquisitions close at a premium, raising the possibility that existing investors could exit their positions at a higher price if Hershey strikes a deal with a buyer.

Hershey is down 9.1% since the beginning of the year, and at $153.42 per share, it is trading 26.8% below its 52-week high of $209.51 from May 2024. Investors who bought $1,000 worth of Hershey’s shares 5 years ago would now be looking at an investment worth $994.04.

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