Key Takeaways:
- The Hershey Company is strengthening its confectionery leadership while expanding into salty snacks through brands like SkinnyPop and Dot’s Pretzels, supported by pricing power across its Hershey and Reese’s brands.
- HSY stock could reasonably reach $236 per share by December 2028, based on our valuation assumptions.
- This implies a total return of 27% from today’s price of $186, with an annualized return of 9.4% over the next 2.7 years.
What Happened?
The Hershey Company (HSY) delivered a strong Q1 2026 earnings beat, with revenue rising 10.6% year over year to $3.1 billion. Adjusted EPS came in at $2.35, beating the consensus estimate of around $2.07 by nearly 15%. CEO Kirk Tanner said the company “kicked off the year strong” and is on track to meet its 2026 financial targets.
Hershey’s and Reese’s delivered first-quarter non-seasonal retail sales lifts of 11% and 10%, respectively. The North America Salty Snacks segment saw a 26% increase in net sales, and the company’s diversification push beyond core chocolate is gaining real traction.
Adjusted operating income came in at $640.7 million, and operating margin expanded to 20.6%, up from 13.2% in the same quarter last year. But volumes fell 2% year over year, so pricing and brand investment drove most of the outperformance.
Management expects a meaningful recovery in adjusted gross margin beginning in Q2, with a full-year improvement of approximately 400 basis points. Hershey expects at least 15% growth in adjusted EPS for Q2 2026, with a full-year growth outlook of 30% to 35%.
Competitors, including Mondelez and Nestle, face the same input cost cycle, but Hershey’s brand loyalty and US market leadership give it a structural advantage in passing on price increases.
Here’s why Hershey stock could deliver meaningful returns through 2028 as the margin recovery thesis plays out and cocoa costs begin to ease.
What the Model Says for Hershey Stock
We analyzed the upside potential for Hershey stock based on its pricing power in core confectionery, its growing salty snacks platform through SkinnyPop and Dot’s Pretzels, and the expected moderation of cocoa input costs over the next several years.
Based on estimates of around 3% annual revenue growth, around 23% operating margins, and a normalized P/E multiple of 20.7x, the model projects Hershey stock could rise from $186 to $236 per share.
That would be a 27% total return, or a 9.4% annualized return over the next 2.7 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Hershey stock:
1. Revenue Growth: 3%%
Hershey delivered revenue growth of 10.6% year over year in Q1 2026, driven by strong net price realization across its confectionery and salty snacks portfolios.
The company raised prices by low double digits across its US confectionery lineup to offset elevated cocoa costs and incremental tariff expenses. But volumes fell 2% year over year, so the headline growth figure reflects pricing leadership rather than broad demand recovery.
Looking ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months, similar to its three-year rate. Management guided for full-year reported net sales growth of 4% to 5%, supported by price realization and increased innovation, cultural, and seasonal activations. The North America Salty Snacks segment’s 26% quarterly growth adds a diversification layer to the revenue base that supports a slightly higher forecast.
Based on analysts’ consensus estimates, we used a 3.4% forecast, reflecting steady pricing contributions and modest volume stabilization as cocoa-related headwinds begin to moderate.
The historical five-year revenue growth rate of 7.5% shows the brand’s genuine compounding power, but near-term volume softness and an uncertain tariff environment keep the forward projection measured.
2. Operating Margins: 23%
Hershey’s adjusted operating income reached $640.7 million in Q1 2026, with operating margin expanding to 20.6% from 13.2% in the same quarter last year. The improvement came from meaningful price realization, supply chain productivity, and savings from the company’s ongoing transformation program.
But the year-over-year comparison is unusually favorable because the prior period included significant derivative mark-to-market losses tied to cocoa hedging.
Management guided for approximately 400 basis points of full-year gross margin improvement and expects the recovery to gain momentum in Q2 and beyond. Hershey’s five-year historical operating margin of around 22.5% and the most recent one-year margin of 23.2% provide useful anchors for where margins can realistically land.
Cocoa costs remain the primary swing factor, because Hershey hedges its cocoa exposure and those hedges roll off into higher-cost periods as the year progresses.
Based on analysts’ consensus estimates, we used an operating margin of 22.6%, which is consistent with the company’s medium-term structural target. This reflects the expected benefit of pricing and transformation savings, balanced against the lag in cocoa cost relief and ongoing tariff expenses on West African imports.
3. Exit P/E Multiple: 20.7x
Hershey stock currently trades at a last-twelve-month P/E of around 29.1x, reflecting its premium positioning as a low-volatility, dividend-paying consumer staples franchise. The five-year historical average P/E of around 24.8x and the ten-year average of around 23.4x show how consistently investors have valued the stock at a premium to broader market multiples.
A 20.7x exit P/E implies modest valuation compression from the current level toward the low end of the historical range. This is intentionally conservative because it builds returns around fundamentals rather than multiple expansion. Full-year adjusted EPS guidance points to $8.42 per share, and management is targeting 30% to 35% growth in adjusted earnings for 2026.
Based on analysts’ consensus estimates, we use a 20.7x exit multiple, which aligns with the ten-year average P/E and does not assume any rerating to the upside. This grounded assumption means the model’s projected return of 9.4% annualized comes entirely from earnings growth and price realization rather than from investors paying a higher multiple for the stock.
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What Happens If Things Go Better or Worse?
Different scenarios for HSY stock through 2034 show varied outcomes based on cocoa cost trajectories, volume recovery pace, and pricing durability (these are estimates, not guaranteed returns):
- Low Case: Cocoa costs remain persistently elevated, volume declines deepen, and tariff headwinds slow gross margin recovery → around 4% annual returns
- Mid Case: Cocoa costs begin to moderate through 2026 and 2027, pricing holds, and salty snacks continue to scale → around 7% annual returns
- High Case: Cocoa turns deflationary by 2027, volumes recover ahead of expectations, and operating leverage builds across both segments → around 9% annual returns
Even in the low case, Hershey’s brand loyalty and low-beta profile provide a real floor for long-term investors. At 9.4% annualized returns in the near-term guided model, the stock sits just below the threshold many investors consider highly attractive, but the combination of consistent dividends and brand resilience makes it appealing for those seeking stability.
The key risk to watch remains the pace of cocoa cost normalization and whether Hershey can hold pricing as input costs ease and consumer trade-down pressures persist.
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Should You Invest in Hershey?
The only way to really know is to look at the numbers yourself. TIKR gives you free access to the same institutional-quality financial data that professional analysts use to answer exactly that question.
Pull up HSY, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.
You can build a free watchlist to track HSY alongside every other stock on your radar. No credit card required. Just the data you need to decide for yourself.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
