Surging Earnings Estimates Signal Upside for Hershey (HSY) Stock

Hershey (HSY) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this chocolate bar and candy maker is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Hershey, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $2.03 per share, which is a change of -2.9% from the year-ago reported number.

The Zacks Consensus Estimate for Hershey has increased 5.79% over the last 30 days, as four estimates have gone higher while one has gone lower.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $8.02 per share represents a change of +27.1% from the year-ago number.

The revisions trend for the current year also appears quite promising for Hershey, with eight estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 20.15%.

Favorable Zacks Rank

The promising estimate revisions have helped Hershey earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Hershey shares have added 17.3% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

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This article originally published on Zacks Investment Research (zacks.com).

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