On Thursday, October 25, 2012, Hershey (NYSE:HSY) is expected to release its third quarter earnings.
Investors should care about a company's quarterly earnings because it shows the state of the business over the past 90 days and provides guidance for the following 90 days. SEE: 5 Tricks Companies Use During Earnings Season
What to Expect: Hershey is expected to report 86 cents per share, up 2.4% from a year ago when the company reported earnings of 84 cents per share.
While down from 91 cents three months ago, the consensus estimate has remained unchanged over the past 30 days. For the fiscal year, analysts are expecting earnings of $3.23 per share.
Hershey is expected to beat last year's reported revenue of $1.62 billion and come in at $1.75 billion for the quarter. Revenue of $6.58 billion is expected for the fiscal year.
Company Performance: In the past four quarters, revenue has shown consistent growth. It increased 6.7% to $1.41 billion in the second quarter. Prior to that, the figure rose 10.7% in the first quarter, 5.7% in the fourth quarter of the last fiscal year and 5% in the third quarter of the last fiscal year.
HSY's P/E ratio of 23.9 is above the industry average of 14.4. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: The P/E Ratio: A Good Market-Timing Indicator
The stock price has dipped over the past quarter just slightly to $70.33 from $70.39 on July 24, 2012. Hershey's worst recent stretch was when its stock price fell $2.23 per share between September 6, 2012 and September 12, 2012.
The Competition: Hershey manufactures chocolate and confectionery products, food and beverage enhancers and gum and mint refreshment products. Most analysts (11 of 15) give Hershey a hold rating. In the last three months, the number of buy ratings has increased slightly.
The company's closest competitor in the food processing industry is General Mills (GIS). Analysts are less optimistic about Hershey than about General Mills. Twelve out of 18 analysts rate the latter a buy compared to four of 15 for the former.