-=Hershey Foods (HSY) reported earnings on Thur 26 Oct 2017 (b/o)

Hershey Foods beats by $0.04, beats on revs; reaffirms FY17 EPS at high-end of range, updates other metrics; announces $100 mln repurchase

• Reports Q3 (Sep) earnings of $1.33 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus of $1.29; revenues rose 1.5% year/year to $2.03 bln vs the $2.01 bln Capital IQ Consensus.
• Adjusted gross margin was 45.3% in the third quarter of 2017, compared to 45.6% in the third quarter of 2016. Supply chain productivity and cost savings initiatives, as well as lower input costs, were more than offset by higher freight rates and increased manufacturing and distribution costs associated with an effort to maintain customer service targets, as well as unfavorable sales mix.
• Co reaffirms guidance for FY17, sees EPS at high-end of $4.72-4.81, excluding non-recurring items, vs. $4.82 Capital IQ Consensus Estimate.
  • The company continues to execute against the priorities outlined earlier in the year. Our seasonal business and programs are on track and the fourth quarter launch of Hershey's Gold, a caramelized crme with peanuts and pretzels, should enable us to deliver on our objectives. The company is committed to its business model of investing in its brands and go-to-market capabilities that should strengthen Hershey's leadership position and build upon marketplace results. The company reaffirms its full-year constant currency net sales growth of around 1.25% and expects foreign currency exchange rates to be about neutral, versus a prior estimate of 0.25 points unfavorable.
  • For the full year, we expect adjusted gross margin to increase about 25 basis points versus our previous outlook of about a 50 basis point increase. Productivity and cost savings initiatives, as well as lower input costs, are expected to be partially offset by the aforementioned higher freight, new packaging and customer service costs. Our brands typically respond positively to marketplace investments and there is no change to our full-year North America advertising and related consumer marketing outlook. International and Other segment advertising and related consumer marketing expense is estimated to be lower in 2017 versus 2016, resulting in total company spend that should be about the same as last year. In 2017, the company continues to anticipate its effective tax rate to be in the 26.5% to 27.0% range. As discussed earlier this year, the reduction in the 2017 tax rate versus 2016 is primarily driven by favorable foreign rate differential and investment tax credits, as well as the adoption of Accounting Standards update 2016-09 for the accounting of employee share-based payments. As a result, the company continues to expect the full year increase in adjusted earnings per share-diluted to be around the high end of its outlook of $4.72 to $4.81, or a 7% to 9% increase versus last year.
• The Hershey Company's board of directors approved a new $100 million stock repurchase authorization. Hershey's solid balance sheet and strong cash flow generation gives the company continued flexibility against its cash priorities, including, returning cash to shareholders in the form of buy backs and dividends while also being able to participate in opportunistic merger and acquisition activity.