The Hershey Company (HSY) reports third-quarter earnings on Oct. 29, with results that will include a significant portion of its Halloween shipments. The candy and snack company posted strong second-quarter performance—net sales grew 6.6 percent to $2.79 billion, and adjusted EPS climbed 57 percent to $1.90, driven by strategic price increases and a notable reduction in cocoa costs.
But there's a problem embedded in those numbers: Hershey's sales volume declined 8 percent in Q2. That gap between price growth and volume contraction is the real story heading into earnings.
The company raised its adjusted EPS outlook for 2026 to a range of $8.36 to $8.52, projecting strong third-quarter growth. However, management has acknowledged that North American consumers remain acutely price-sensitive and are pulling back on discretionary purchases. Hershey's pricing strategy is squeezing margins by volume—a trade-off that works only if the company can stabilize shipments before the math deteriorates further.
Cocoa prices have fallen below their late 2024 highs, giving Hershey a genuine cost advantage that the market has underestimated. The risk: if wholesale cocoa costs remain depressed, retail pricing power evaporates, and the company will have no tailwind to offset ongoing volume weakness.
Key downside risks are real. Sustained volume declines or tariff headwinds could force margin compression despite lower input costs. El Niño weather patterns pose a longer-term volatility risk to cocoa harvests and pricing.
HSY trades at a forward P/E of around 17 and has fallen 12 percent over the past year. At that valuation, the stock prices in execution risk—management must stabilize volumes and defend pricing power simultaneously. If the Oct. 29 report shows volumes stabilizing in Q3, the 2026 EPS guidance becomes credible and the stock re-rates higher. If volumes continue declining, the gap between current consensus and reality will widen, and downside to 15x earnings is in play.
