Margin Turn Underway, Volume Recovery Still Pending

Research evidence excerpt

Margin Turn Underway, Volume Recovery Still Pending

USA | Food

Hershey EquityJulyResearch16, 2026

TARGET | ESTIMATE CHANGEMargin Turn Underway, Volume Recovery Still

RATING HOLDPending

PRICE $170.27^

Q2 should mark the start of HSY's margin recovery as peak-cost inventory laps,

even as pulled-forward Q1 shipment timing reverses and masks underlying PRICE TARGET | % TO PT $190.00 ($199.00) | +12%

demand. While pricing continues to carry results, tracked U.S. retail volumes 52W HIGH-LOW $239.48 - $161.29

remain pressured and have yet to show signs of a turn, keeping the debate FLOAT (%) | ADV MM (USD) 71.7% | 384.79

squarely on demand durability. Although innovation and 2H catalysts could MARKET CAP $34.7B

help, we remain sidelined pending sustained sequential improvement in volume TICKER HSY ^Prior trading day's closing price unless otherwise

trends. noted.

Q2 marks the start of HSY's margin recovery. After several quarters of high cocoa costs, this FY (Dec) CHANGE TO JEFe JEF vs CONS

quarter should be the first with meaningful y/y GM expansion, and we model ~300 bps of 2026 2027 2026 2027

improvement as the highest-cost inventory laps the prior-year peak. That said, cocoa prices have REV NM NA NM -1%

ticked back up from February lows and risen sharply over the past month, even if it remains well

EPS NA NA NM +1%

below year-ago levels. With a good portion likely hedged into next year, that move is unlikely to

disrupt the NT margin path, though a sustained climb from here would be a forward headwind.

2026 ($) Q1A Q2 Q3 Q4 FY

Timing reversals could mask underlying demand this quarter. The ~2 pts of earlier shipments EPS 2.35 1.42 2.29 2.37 8.43

pulled into Q1 are set to reverse, and we expect organic sales to dip modestly in Q2. We forecast PREV 1.37 2.38 2.33