Here's Why Hershey (HSY) Fell More Than Broader Market

Hershey (HSY) has recently underperformed the broader market and its Consumer Staples sector, with shares down 3.23% over the past month. The confectionery giant faces significant earnings headwinds, with Q2 2025 EPS projected to decline 21.26% year-over-year and full-year EPS expected to fall 37.25%, despite revenue growth forecasts. This negative outlook is further reflected in recent downward analyst estimate revisions, leading to a Zacks Rank of #4 (Sell), while the stock trades at a premium valuation (Forward P/E of 28.05, PEG of 6.09) compared to its underperforming industry.

Analysis

Hershey (HSY) is exhibiting significant fundamental and market-based weakness, as reflected in its recent stock underperformance. The stock's 3.23% loss over the past month has lagged both the Consumer Staples sector (-1.24%) and the S&P 500's 4.97% gain. This divergence is underpinned by a deteriorating earnings forecast, with consensus estimates for the upcoming quarter pointing to a 21.26% year-over-year decline in EPS despite a projected 21.35% increase in revenue, signaling severe margin pressure. The full-year outlook reinforces this concern, with an expected earnings contraction of 37.25% on minimal revenue growth of 2.64%. This negative trend is further confirmed by a 1.13% downward revision in the consensus EPS estimate over the past month, contributing to the stock's Zacks Rank of #4 (Sell). Compounding these issues, HSY trades at a premium valuation with a Forward P/E of 28.05 and a PEG ratio of 6.09, both significantly above its industry averages, within a sector that ranks in the bottom 14% of over 250 industries.

Key Decisions for Investors

• Given the projected sharp decline in earnings for both the next quarter and the full year, investors should be cautious of the stock's premium valuation, as its Forward P/E of 28.05 and PEG of 6.09 are not supported by near-term growth prospects.
• The upcoming earnings report on July 30, 2025, is a critical catalyst; traders should watch for any commentary on margin stabilization, as the current divergence between revenue growth and earnings decline is unsustainable.
• Considering the stock's underperformance, negative analyst revisions, and a Zacks Rank #4 (Sell), current holders may consider reducing exposure, while new investors should likely await a more favorable entry point or a demonstrated turnaround in profitability.