Hershey with bigger cocoa exposure
Chocolate giant Hershey reported their earnings today. Q4 2024 was better than expected but the outlook for this year is even worse compared to their competitor Mondelez. While they expect a decline in EPS of about -10%, Hershey warns that EPS could be „down in the high-40% range“. Background in both cases is the high cocoa price which has increased about 2x in the last 12 months alone.
Hershey is exposed to the cocoa price more than Mondelez since they have a less diversified product portfolio. MDLZ sells not only chocolate but also cookies and cream cheese. That makes their business a bit more resiliant in my view.
Cocoa is the main driver
If we see some relief on the price front for cocoa, we could get better than expected earnings for this year and this is the scenario I am speculating on with a small stack of shares. The price has come down a bit already from its highs at about $12000 per tonne, currently trading at $10000/tonne.
Analysts have a moderate buy rating for MDLZ with a consensus price target of $66. That would be an upside of about +20% and the dividend of 3% per year comes on top. Not bad, even if we have to wait until 2026 for this outcome.
