QS Research · Michael Burry's Scion Capital analyst template · 2006
HERSHEY CO (HSY)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $173.95 (close 2026-11-10)
Conclusion: WATCH
Conviction medium · base case +29% · downside -25% · upside +33%
The market is pricing HSY at 21.7x TTM P/E and 14.1x EV/EBITDA on TTM to Sep 27, 2026 net income of $1.79B and EBITDA of $3.08B; the independent base anchor of 27.9x peer-median P/E gives $223.65 (+29%), while a 29.0x upside case gives +33% and a -12% earnings downside at a compressed multiple gives about -25%. That is not enough for a long because Q3 2026 organic sales grew only +0.8% on +11 points price and -10 points volume, International organic fell -9.7%, and the 2027 outlook is only 2-4% organic with freight/input cost inflation. The 2026-10-29 Q3 release raised FY2026 adjusted EPS guidance to $8.58-$8.74 and could support a re-rate, but the stock sits between the cases rather than at a deep-value entry. Watch: the brand/trademark moat, 20.8% ROIC and 5.5% FCF yield are real, but volume and 2027 growth need to prove out before the risk/reward is compelling.
Key numbers
- Share price: $173.95
- Market cap: $38.93B
- Latest financial period: TTM to Sep 27, 2026
- Revenue (TTM): $12.26B
- EV / EBITDA (TTM): 14.1x
- P/E (TTM): 21.7x
- FCF yield: 5.5%
- Price / book: 8.40x
- Earnings-quality flags (TTM): none flagged
- EV / FCF (TTM): 20.5x
- Revenue growth (latest fiscal year): +4.4%
- ROIC (TTM): 20.8%
- WACC: 5.5%
- Economic profit spread: +15.3 pts
The 15 boxes
- ✓ 1. Long-form business notes
Hershey sells chocolate, non-chocolate confectionery, gum and mints, protein bars, salty snacks and pantry items under more than 85 brands in approximately 65 countries, organized in the FY2025 10-K into North America Confectionery, North America Salty Snacks and International. Revenue is concentrated in North America and in wholesale distribution; McLane was 27% of 2025 consolidated net sales. FY2025 revenue was $11.69B with operating income $1.44B and operating cash flow $2.28B; TTM to 2026-09-27 revenue was $12.26B with operating income $2.55B and operating cash flow $2.57B. From the FY2020 to the FY2025 10-K, segment reporting changed from one North America reportable segment plus International and Other to three segments, and the brand, country and product footprint changed through acquisitions and divestitures.
- ✓ 2. Competitive advantage
The sources support a brand/trademark-based advantage in North American confectionery and salty snacks: the FY2025 10-K calls many brands leading with wide consumer acceptance and says key trademarks are material. It also relies on long-term extendible licenses for Kit Kat/Rolo, Cadbury/Caramello, Almond Joy/Mounds and other brands. Competition is intense from global, regional, local and private firms and large retailers, and FY2025 operating income fell to $1.44B from $2.90B despite revenue rising to $11.69B; a $491.0M unfavorable commodity mark-to-market charge sits in FY2025 cost of sales. Cash flow remained positive ($2.28B FY2025 operating cash flow; $2.57B TTM), but customer concentration and new AI competition risk temper the moat.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 27, 2026) net sales rose 3.0% to $3,275.5 million but organic, constant currency sales grew only 0.8%: price +11 points against volume -10 points, plus ~2.1 points from the LesserEvil acquisition and 0.1 point of FX. Reported gross margin jumped to 46.1% from 32.6% and reported operating margin to 25.0% from 13.7%, but a chunk of that is one-off: $113.4 million pre-tax of commodity derivative mark-to-market gains and tariff refunds, leaving adjusted gross margin 42.7% (+1,090 bps) and adjusted operating margin 23.0% (+970 bps). Cash fell $249.2 million to $676.7 million against $5.1 billion of debt; FY2026 adjusted EPS guidance was raised to growth of 36% to 38.5%, with the outlook excluding any future tariff refunds.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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