The shares of Hershey $HSY (-1,01%) fell by 3.2% on Monday after Wells Fargo reiterated its "Underweight" rating with a price target of USD 135.00 for the chocolate manufacturer.
The share price decline was triggered by the announcement that Kirk Tanner, the current CEO of Wendy's and former manager at PepsiCo, will succeed outgoing CEO Michele Buck from August 18, 2025. The share is currently trading at USD 169.93 and appears fairly valued with a P/E ratio of 20.9x and an EV/EBITDA of 14.1x, according to an analysis by InvestingPro.
Wells Fargo cited mixed investor reaction to Tanner's recent positions and the possibility of a "CEO reset" for the negative price reaction, while Hershey faces persistent cocoa inflation that could exceed 20% in 2026, according to forecasts.
The analysts maintain their cautious stance and point to the challenge for the company to implement price increases to compensate for inflation without losing its core customer base.
There are also concerns regarding the price elasticity of consumers and the current valuation of the share.
Tanner brings extensive experience from the consumer goods industry to Hershey. Prior to his short tenure at Wendy's, which began in February 2024, he worked at PepsiCo for over 30 years.
The uncertainty is also reflected in other ratings.
- The rating agency Moody's has lowered its outlook for the company from "stable" to "negative" due to rising cocoa prices and tariffs, but has confirmed its A1 rating for senior unsecured bonds.
- Moody's expects a significant decline in earnings for Hershey in 2025 due to these burdens.
- The analyst firms Mizuho and Bernstein have maintained their "Neutral" and "Market Perform" ratings for Hershey shares, respectively, with a consensus price target of USD 155.00.
They also base their assessment on concerns about cocoa inflation and possible adjustments to earnings expectations under Tanner's leadership.
Meanwhile, Hershey plans to acquire LesserEvil, which is expected to close in 2025 and will be financed with USD 750 million from the company's cash reserves. Hershey's strategic focus remains on customer segmentation and partnering with customers as the company navigates these financial challenges.
