Hershey Stock May Be Near a Sweet Spot as Cocoa Pressure Eases

Key Points

• Hershey’s first-quarter results showed stronger sales, earnings and margins as pricing helped offset cocoa and tariff-related costs.
• Lower cocoa prices could support margin recovery, but commodity volatility and consumer demand remain key risks.
• Hershey’s ONE Hershey operating model may help align its sweet, salty and protein brands, but analysts remain cautious on the stock.

After a sweet run-up in its stock back in February, Hershey NYSE: HSY is now trading 3.8% below its year-start price.

But while the share price is lingering, the company’s picture has changed. Having overcome soaring cocoa costs with remarkable pricing power, easing commodity pressures, and the proven strength of its brands, the company is positioning itself for a potential margin recovery.

Most analysts rate it a Hold, with a 20% upside, as a balance of pricing and demand continues. Yet with a proven loyalty from customers and an alignment of new products, the company appears well-positioned if the market follows current trends.

Hershey's Pricing Power Is Paying Off

What hurt the company recently was a well-known event. Cocoa prices surged to historic highs in late 2024 and 2025, squeezing the margins of every chocolate maker in the world. Hershey saw its net income drop from $797 million in the fourth quarter of 2024 to $224 million the next three months in 2025 and to $63 million the quarter after that.

For Hershey, which generated annual sales of $11.7 billion last year and holds a market capitalization of around $36 billion, the shock also arrived at an awkward moment. The company was already pursuing a broader portfolio reorganization. It was pushing harder into salty snacks, including Dot's Homestyle Pretzels. LesserEvil, and SkinnyPop, as well as protein products, such as Fulfil bars in North America.

Sales and Earnings Rebound Despite Higher Costs

When cocoa prices soared, the story for Hershey shifted from long-term growth to short-term damage control. As a result, the company leaned into its pricing power. By the end of last year, organic price realization, or the benefit from price increases, rose 6% in the fourth quarter of 2025, then accelerated to 10% in the first quarter of 2026. Consumers might have grumbled, but they kept buying.

The first-quarter 2026 results told the broader story. Consolidated net sales reached $3.1 billion, up 10.6% from $2.8 billion a year earlier. Adjusted earnings per share came in at $2.35, an increase of 12.4%, and well above analyst estimates, compared with $2.09 in the prior-year period. Reported net income was $435 million, or $2.13 per share, from $1.10 a year earlier.

Operating results were also sharply higher. The first quarter’s reported operating profit rose 73.5% to $640.7 million, while the profit margin hit 20.6%, up 7.4 points from last year. The company said an increase in sales and prices helped offset higher commodity and tariff-related costs.

Looking ahead, management reaffirmed its full-year guidance of 4% to 5% net sales growth and 30% to 35% adjusted earnings per share (EPS) growth. The full-year adjusted EPS is projected to come in the range of $8.20 to $8.52 compared with $6.31 in 2025.

Lower Cocoa Prices Could Boost Margins

The success of its salty snacks was evident in North America, which reported $2.5 billion in net sales. That segment recorded an acquisition-led 26% year-over-year increase, while North American confectionery products recorded an 8.3% increase.

The cost picture is improving, but not resolved. In the previous quarter, the gross margin fell 17 percentage points to 37% as cocoa prices remained high. Even in the first three months of 2026, adjusted gross margin rose to 40.4%, but was still down 80 basis points year over year due to elevated commodity and tariff-related costs.

The encouraging development is that cocoa prices have fallen dramatically from their late-2024 and early-2025 highs, which were well above $10,000 per metric ton. Having fallen below $4,000 earlier this year, the commodity is currently trading at nearly $5,000.

ONE Hershey Aims to Drive Long-Term Growth

Beyond cocoa, the company is making other structural moves.

In March, the company announced the unification of its sweet, salty, and protein brand portfolios under an integrated operating model called ONE Hershey. The company hopes that by having its products under a single umbrella, it can more effectively align strategy, cross-selling, brand messaging, in-store performance, and innovation.

The initiative also comes at a time of top management changes. A new president and CEO took over last August, and more recently, a new president of U.S. operations was appointed to oversee the integrated businesses.

Analysts See Upside But Remain Cautious

The financial picture around the stock reflects the tension between the business quality and the cost environment.

Over the past 52 weeks, Hershey has traded between $160 to nearly $240 per share. At current levels around $175 per share, its price/earnings ratio of over 33 is not cheap, and the consensus among 23 analysts is that the stock is currently a Hold. Sixteen analysts recommend a Hold, and seven recommend a Buy.

With an average 12-month price target of $217.50, the current upside on the stock is above 20%. The highest price target is $260 and the lowest is $185, suggesting genuine uncertainty about the pace of margin recovery.

Hershey also carries a sizable quarterly dividend of $1.45 per share for a yield above 3%. The company has raised its dividend for 15 consecutive years,

The Next Few Quarters Could Be Critical

Whether the momentum that Hershey has created continues will soon be seen in its second-quarter earnings.

The question is whether its pricing power has held and how much lower cocoa costs will help. New management will also help set direction.

For investors, Hershey presents a choice between patience and precision. Hershey is a category-leading company with a storied brand in the consumer staples sector. It has proven pricing power, a 15-year dividend growth streak, and a commodity headwind that appears to be easing. The next quarter or two should show if the trajectory continues.