Hershey Co.'s (HSY) new management team, led by David West, is expected to recharge growth at in addition to continuing with the three-year Global Supply Chain transformation plan. Since the stock is at the low end of its historical valuation range, Hershey's stock is attractive and remains rated a Buy.
Hershey's stock has traded in a wide P/E multiple range of 15 to 32 over the last 15 years. Over the past five years, the stock has traded in the P/E multiple range of 18 to 32. The stock is currently trading at the lower end of the five year P/E range at 20.5. In 2008, Hershey's EPS should experience a modest decline due to the impact of commodity cost inflation and increased promotional expenses.
However, the management will continue focusing on core products, introducing new products, reducing costs, and expanding operations overseas. We expect Hershey's stock to trade in a P/E multiple range of 18 to 28. Despite the recent earnings disappointments and reduced earnings guidance last year, the stock appears to be attractively valued at the current levels. The stock price target of $51.50 is based on a P/E multiple of 28 times our depressed 2008 EPS estimate.
Read the full analyst report on HSY
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