Key Takeaways:
- Margin Collapse and Recovery: Hershey’s gross margin fell from 47% in 2024 to 34% in 2025 due to cocoa inflation, but management guided 2026 gross margins back toward 41%, supported by $230 million in efficiency savings and a low single-digit decline in total COGS.
- Dividend Raised Despite Pressure: Hershey raised its quarterly dividend to $1.452 per share last February, bringing the annualized payout to $6, even as the payout ratio sits at 126%, reflecting management’s confidence in the 2026 earnings recovery of $8 to $9 per share.
- Price Projection: Hershey stock could reach $278 by December 2028, grounded in a 3% revenue CAGR toward $12 billion and operating margins recovering toward 23%, applied against a 24x P/E multiple on normalized earnings.
- Total Upside: Hershey’s $278 target represents a total return of 25% from the current price of $223, translating to an annualized return of 8% per year over 2.9 years.
Breaking Down the Case for Hershey Co.
The Hershey Company (HSY) sells confectionery, salty snacks, and protein products across more than 80 countries, with $12 billion in 2026 consensus revenue and 3 distinct operating segments.
Last February, Q4 2025 results showed revenue of $3 billion, beating the $3 billion consensus estimate, as 28% Salty Snacks growth and favorable price realization offset volume declines from mid-September pricing actions.
Full-year 2025 revenue reached $12 billion, but gross profit collapsed 26% to $4 billion as COGS surged to $8 billion, compressing gross margins from 47% in 2024 to 34%.
Operating income fell 48% to $2 billion, pushing operating margins from 27% down to 13%, the lowest level in the company’s 5-year history shown in available data.
Management guided 2026 adjusted EPS to $8 to $9, implying 30% earnings recovery, supported by $230 million in efficiency savings and a low single-digit decline in total cost of goods.
CEO Kirk Tanner stated directly: “We’re carrying meaningful momentum into the year, with a clear and focused commitment to accelerating sustainable sales growth, restoring margins, and positioning Hershey for the long-term success.”
A March 31 Investor Day in New York is set to unveil the full multi-year strategic plan, innovation pipeline across Hershey, Reese’s, Dot’s, and protein brands, and the 2027 and 2028 financial framework.
At $223 with a consensus Hold rating and a median analyst target of $200, the stock trades above where most analysts see fair value, raising the question of whether the 2026 margin recovery is already priced in at 29x forward earnings.
What the Model Says for HSY Stock
Hershey’s gross margin collapsed from 47% in 2024 to 34% in 2025 on cocoa inflation, and last February’s 10% pricing action and $230 million in efficiency savings set the 2026 recovery in motion.
The market assumption of 3.3% revenue growth and 22.6% operating margins, in line with Hershey’s 5-year historical average of 22.5%, supports a 24.3x earnings multiple, producing a target price of $278.
At a total return of 24.8% from the current price of $223, the annualized return of 8% falls short of the standard 10% equity hurdle rate, leaving thin compensation for the margin recovery risk still ahead.
The model signals a Hold — Hershey’s 8% annualized return does not clear the 10% hurdle, meaning the stock does not adequately reward investors for the execution risk tied to margin restoration and cocoa cost uncertainty through 2028.
Hershey’s 8% annualized return falls below the 10% equity hurdle rate, offering insufficient risk compensation.
At a 24.3x exit multiple, the outcome represents modest capital appreciation, justified only if the 22.6% margin assumption is fully achieved through 2028.
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: 3.3%
Hershey posted 4.4% revenue growth in 2025, reaching $12 billion, as salty snacks grew 28% in Q4 and price realization across the confectionery segment offset volume declines from mid-September pricing.
The 5-year historical revenue CAGR of 7.5% reflects a period of clean volume and price growth before cocoa inflation disrupted the cost structure and forced the company into a pricing cycle that now pressures volumes.
Management guided 2026 net sales growth of 4% to 5%, with acquisitions adding 150 basis points, meaning the organic business alone is expected to grow closer to 3%, directly in line with the 3.3% market assumption.
SNAP waivers across 12 states, GLP-1 adoption, and post-pricing elasticity risk all create structural pressure on confectionery volumes through 2028, and any sustained demand softness directly reduces the revenue base the margin recovery story requires.
This sits below last year’s historical CAGR of 4.4%, as the post-pricing volume absorption and macro consumer headwinds constrain near-term growth, and shortfalls in the top line compound directly against the margin recovery timeline.
2. Operating Margins: 22.6%
Hershey’s 2025 operating margin fell to 13.2% from 26.7% in 2024, as COGS surged to $8 billion on cocoa inflation, and the full-year impact compressed gross profit by 26% to $4 billion.
The 5-year historical average operating margin of 22.5% represents Hershey’s pre-cocoa-shock earnings structure, and the 22.6% market assumption essentially requires a full structural restoration to that historical level by 2028.
Management guided 2026 gross margins toward 41%, a 400 basis point recovery from 34%, supported by $230 million in efficiency savings and a low single-digit decline in total COGS, as cocoa costs stabilize above historical norms.
Reaching 22.6% operating margins by 2028 requires not just gross margin recovery but simultaneous control of SG&A, which has grown from $2 billion in 2021 to $2 billion in 2025, while media investment rises double digits in 2026.
If cocoa finds a new equilibrium above historical levels, as CFO Steve Voskuil acknowledged, the 41% gross margin target gets harder to sustain, and the path from 13% operating margins in 2025 to 23% by 2028 narrows significantly.
This sits above the 1-year operating margin of 13.2%, as cocoa deflation, efficiency savings, and pricing realization collectively drive recovery, and any delay in that sequence keeps margins below the level the exit multiple requires to hold.
3. Exit P/E Multiple: 24.3x
A terminal P/E multiple converts Hershey’s projected 2028 earnings into a stock price, and at 24.3x, it reflects what the market would pay for a fully restored, normalized confectionery and salty snacks business at the end of the forecast period.
Hershey’s current forward P/E as of last February sits at 26.6x on normalized earnings, meaning the model’s 24.3x exit multiple is a modest discount to today’s market pricing, making the multiple assumption conservative relative to current levels.
The 5-year historical average P/E of 24.7x closely matches the 24.3x market assumption, grounding the exit in Hershey’s long-run earnings multiple rather than a cyclical peak or trough valuation.
The 24.3x exit already captures the benefit of margin recovery to 22.6% and revenue growth to 3.3% through the income statement, and adding further multiple expansion on top of those gains would double-count the same improvement.
If operating margins disappoint and land closer to 18% rather than the assumed 23%, the earnings base at the exit point shrinks materially, and the 24.3x multiple produces a stock price well below $278 without any change to the multiple itself.
This is in line with the 5-year historical P/E of 24.7x, as Hershey’s brand portfolio and confectionery category resilience historically supported that earnings multiple, and sustaining 24.3x through 2028 requires the full margin restoration embedded in the model to fully materialize.
What Happens If Things Go Better or Worse?
Hershey stock’s range through 2030 is set by 3 real variables: the pace of gross margin recovery from the 2025 cocoa shock, the durability of salty snacks momentum, and consumer volume response to the 10% pricing taken in late 2025.
- Low Case: If elasticity worsens beyond the 0.8 assumption and SNAP waivers across 12 states meaningfully reduce confectionery demand, revenue grows around 2.7% and net income margins stay near 15.3% → 3.5% annualized return.
- Mid Case: With cocoa costs stabilizing, $230 million in efficiency savings converting as planned, and salty snacks sustaining its growth trajectory, revenue grows near 2.9% and margins improve toward 16.4% → 7.7% annualized return.
- High Case: If cocoa deflation accelerates into 2027, the Reese’s and Hershey brand campaigns drive above-plan volume recovery, and the March 31 Investor Day reveals a stronger-than-expected multi-year earnings framework, revenue reaches 3.2% and margins approach 17.1% → 11.2% annualized return.
How Much Upside Does Hershey Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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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!
