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HERSHEY CO (HSY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered a clean top-line beat and solid EPS beat vs S&P Global consensus: revenue $3.18B vs $3.12B consensus (+2.1%), Primary EPS $1.30 vs $1.06 consensus (+22.2%), with EBITDA also above expectations (+11.2%)*, aided by innovation, pricing, and strong salty snacks momentum . Values with asterisk retrieved from S&P Global.
  • Mix and input inflation weighed heavily on profitability: adjusted gross margin 31.8% (-850 bps YoY) and adjusted operating margin 13.3% (-860 bps YoY) as higher cocoa/tariff costs and mix offset price realization and productivity .
  • FY25 outlook raised: net sales growth to ~3% (from “at least 2%”), reported EPS growth to down 48–50% (from ~-50%), and adjusted EPS growth refined to down 36–37% (upper half of prior -36–38%), with tariff expense trimmed to $160–$170M (from $170–$180M) and interest expense to ~$195M (from ~$200M) .
  • Key call narratives: everyday CMG running double-digits in recent weeks; Halloween season to finish “somewhat soft”; 2026 path back to algorithm with potential upside depending on elasticity, cocoa and tariffs; U.S. category described as rational; international swung to loss amid higher cocoa sensitivity .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based top-line momentum: consolidated net sales +6.5% YoY to $3,181.4M driven by ~6 pts price and slightly positive volume; salty snacks net sales +10% with 11 pts volume; international +12.1% with 7 pts price and ~6 pts volume .
    • Innovation and execution: “Third quarter results surpassed expectations, as strong innovation, strategic brand investments, and market leading execution drove momentum across business segments” — CEO Kirk Tanner . Reese’s Oreo called a top growth driver with a robust pipeline into 2026–27 .
    • Salty snacks outperformance vs category: 12-week retail takeaway +14.2% with share gains across SkinnyPop, Dot’s (now #1 pretzel share), and Pirate’s Booty; segment income +6.9% YoY despite mix/investments .

  • What Went Wrong

    • Margin compression from inputs/mix: adjusted gross margin 31.8% (-850 bps YoY) and adjusted op margin 13.3% (-860 bps YoY) as higher commodity and tariff costs plus unfavorable mix outweighed pricing and productivity .
    • International profitability: segment loss of $(13.6)M, margin (5.6)% (down 1,210 bps YoY), with elevated cocoa intensity/elasticity and shipment timing cited; management remains constructive medium term .
    • Seasonal softness: Halloween “got off to a slow start” and would still be “somewhat soft” even with a typical last-week surge (Friday Halloween, warm weather). Company is reassessing pack/price points and marketing for future seasons . Unallocated corporate expense rose 38.9% YoY on incentive comp and consulting .

Financial Results

Consolidated trends (actuals)

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD Billions)$2.81 $2.61 $3.18
Reported EPS - Diluted ($)$1.10 $0.31 $1.36
Adjusted EPS - Diluted ($)$2.09 $1.21 $1.30
Gross Margin % (Reported)33.7% 30.5% 32.6%
Gross Margin % (Non-GAAP)41.2% 38.1% 31.8%
Operating Margin % (Reported)13.2% 7.4% 13.7%
Operating Margin % (Non-GAAP)21.7% 15.7% 13.3%
Effective Tax Rate % (Reported)30.7% 57.9% 25.7%
Effective Tax Rate % (Non-GAAP)24.4% 32.8% 26.7%

Q3 vs S&P Global consensus

MetricConsensus*ActualSurprise
Revenue ($USD Billions)$3.12*$3.18 +2.1%
Primary EPS ($)$1.06*$1.30 (Adj. EPS - Diluted) +22.2%
EBITDA ($USD Millions)$502.4*$558.6*+11.2%
Values with asterisk retrieved from S&P Global.

Segment performance – Q3 2025

SegmentNet Sales ($MM)YoY %Segment Income ($MM)YoY %Segment Margin %
North America Confectionery2,615.6+5.6%571.5(21.2)%21.8%
North America Salty Snacks321.0+10.0%57.7+6.9%18.0%
International244.8+12.1%(13.6)NM(5.6)%
All data: .

KPIs and operating drivers

KPIQ1 2025Q2 2025Q3 2025
U.S. CMG retail takeaway (12-wk, YoY)(4.2)% +21.8% +5.4%
U.S. Salty retail takeaway (12-wk, YoY)+9.6% +6.3% +14.2%
Price realization (pts, Total Co.)~+2 pts ~+5 pts ~+6 pts
Volume/mix (pts, Total Co.)~-15 pts ~+21 pts Slightly positive (~0)
Advertising & consumer marketing (YoY)(14.2%) +35.5% (5.0%)
Unallocated corporate expense ($MM)158.8 179.6 193.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net sales growthFY25Up at least 2% ~3% Raised
Reported EPS growthFY25Down ~50% Down 48%–50% Raised (upper end improved)
Adjusted EPS growthFY25Down 36%–38% Down 36%–37% Tightened to upper half
Tariff expense ($MM)FY25~$170–$180 ~$160–$170 Lowered
Effective tax rate (reported)FY25~27% ~30% Higher
Effective tax rate (adjusted)FY25~24% ~26% Higher
Other expense ($MM)FY25~$75–$80 ~$30–$35 Lowered
Interest expense ($MM)FY25~200 ~195 Lowered
Capital expenditures ($MM)FY25~425–450 ~425 Narrowed lower end
Advancing Agility & Automation savings ($MM)FY25~150 (up from 125) ~150 Maintained
DividendsQ4’25—$1.370 (Common), $1.245 (Class B), payable Dec 15, 2025 Declared
Note: Guidance excludes impacts from the proposed LesserEvil acquisition .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Pricing elasticityEmphasis on pricing to mitigate inputs; category growth supported by seasons/innovation Planning 2026 elasticity at ~-1; early reads “no concerns”; U.S. market rational; pack-level gaps not concerning Stable/benign so far
Cocoa costsQ2: “mitigating cocoa inflation through strategic pricing, productivity, tech-enabled efficiency” Cocoa still ~70% above 2023; hedging allows some downside participation; could turn deflationary later in 2026 Moderating risk
TariffsQ1 guide only Q2 tariffs ($15–$20M) ; Q2 raised to $170–$180M Trimmed to $160–$170M; cautious on blanket exemption; optimistic on trade deals Improving
Seasonal performanceStrong Easter dynamics in Q2 comps Halloween soft (Friday timing, warm weather); reassessing pack/OPP/mix and marketing Mixed
InnovationQ1: Dot’s/Skinnypop momentum ; Q2: Reese’s Oreo launch Reese’s Oreo a top driver; robust 2026–27 pipeline; co-merch elevated core Strengthening
InternationalQ1 profit $28.7M ; Q2 profit $19.8M Q3 loss $(13.6)M; higher cocoa intensity and elasticity; share gains in most markets Worsening near term
Supply chain/ERP cadenceQ1–Q2 volume swings from ERP timing and seasonal shifts Q3 volume slightly positive; timing benefited International shipments Normalizing
Tax rateQ1 adj. ETR 24.4% ; Q2 adj. ETR 32.8% (non-U.S. reserves) Q3 adj. ETR 26.7%; commentary on drivers and outlook work-in-progress Easing from Q2 spike
Convenience channel focus—Intensified focus (gold standard merchandising, tentpoles, loyalty tools); category +6% in C-store Positive focus

Management Commentary

  • “Third quarter results surpassed expectations, as strong innovation, strategic brand investments, and market leading execution drove momentum across business segments… we are raising our full year outlook for net sales and earnings per share.” — CEO Kirk Tanner .
  • “For 2026… success looks like growing with or ahead of the category while we build back margin… long term algorithm top-line 2–4%… potential for upside on EPS.” — CEO and CFO commentary .
  • “Everyday CMG… we’re up double digits in the last four weeks… nothing gives us concern [on elasticity] so far.” — CFO .
  • “Cocoa is still 70% higher than it was in 2023… we’re working closely with customers; pricing cadence is deliberate.” — CEO .
  • “Halloween… would be somewhat soft… we’ll go to school on pack types, offerings, OPPs, product mix, and marketing.” — CEO .

Q&A Highlights

  • Elasticity and pricing cadence: Management sees a rational U.S. category and no major pack-level price gap concerns; planning 2026 elasticity at ~-1 with balanced recovery and continued brand investment .
  • Cocoa/tariffs and 2026 EPS: More optimistic vs prior quarter on cocoa and potential tariff relief via trade deals; still modeling cocoa inflation and ~$200M incremental tariffs in 2026; algorithm EPS with upside remains “on the table” .
  • Seasonality: Halloween tracking somewhat soft due to timing/weather; reallocating investments to support holiday and improve seasonal execution next year .
  • International: Loss in Q3 tied to cocoa intensity and elasticity; management still optimistic given share gains and expects profitability as cocoa headwinds ease over time .
  • Channels/brands: Strong salty momentum (Dot’s #1 pretzels; SkinnyPop share gains); heightened focus on convenience channel execution and personalization tools .
  • Tax rate: 2025 tax dynamics driven by reserves, procurement strategies, and fewer attractive tax credit opportunities; 2026 tax outlook to be provided with guidance .

Estimates Context

  • Street vs results: Revenue beat by ~2.1%* and Primary EPS beat by ~22.2%; EBITDA beat by ~11.2%. 18 EPS and 14 revenue estimates informed consensus breadth for Q3*. Values retrieved from S&P Global.
  • Implications: Despite margin headwinds, top-line momentum and innovation support upward revisions to near-term revenue forecasts; margin estimates likely move lower for FY25 but FY26 confidence may improve given elasticity commentary and potential cocoa/tariff relief .

Key Takeaways for Investors

  • Near-term: A clear beat-and-raise quarter on sales/EPS should be supportive as investors recalibrate Q4 mix (international timing) and seasonal dynamics; watch Halloween sell-through and holiday momentum .
  • Margin trough dynamics: Q3 non-GAAP margins compressed on inputs/mix; visibility improves in 2026 as cocoa moderates, tariffs potentially ease, and transformation savings continue .
  • Demand health: Everyday CMG strength and salty snacks share gains indicate resilient demand and effective innovation; supports confidence in category rationality and pricing sustainability .
  • International is the swing factor: Near-term profitability pressured by cocoa/elasticity; long-term recovery tied to input normalization and pricing power in key markets .
  • Guidance quality: Raising FY25 sales/EPS (narrowed ranges) and trimming tariff/interest assumptions improve credibility; dividend maintained, signaling balance-sheet confidence .
  • 2026 setup: Management targets a return to algorithm growth with potential EPS upside contingent on elasticity, cocoa, and policy outcomes; focus remains on brand investments and balanced recovery .
  • Stock narrative: Innovation-led share gains, category rationality, and improving 2026 outlook are constructive; margin recovery cadence and seasonal execution remain the key debate points likely to drive multiple re-rating .

Values with asterisk retrieved from S&P Global.

Additional references

  • Q3 results press release (earnings release): .
  • Q3 2025 Q&A transcript: .
  • Q2 results press release: .
  • Q1 results press release: .
  • Dividend declaration (Oct 30, 2025): .