1 Reason to Watch Hershey Stock in 2025

The Hershey Company (HSY) has experienced a significant profitability decline due to a cocoa shortage, with H1 2025 net income falling 71% from the prior year period. Despite this, the stock, currently 32% below its May 2023 high but up 35% since February, presents a compelling investment case. Its P/E ratio of 25 is based on depressed earnings, suggesting considerable upside if cocoa supplies normalize and profits rebound to 2024 levels. Furthermore, HSY offers an attractive 2.9% dividend yield, above its 5-year average, supported by 16 consecutive years of increases, enhancing its appeal to investors seeking potential appreciation and yield.

Analysis

The Hershey Company (HSY) is navigating significant operational headwinds due to a severe cocoa shortage stemming from poor harvests in West Africa. This has directly impacted profitability, evidenced by a reported 71% year-over-year decline in net income to $287 million for the first half of 2025, a steep drop from the $2.2 billion in total profit earned in 2024. Consequently, the stock trades 32% below its May 2023 high, though it has shown recent positive momentum with a 35% increase since its February low. The core investment thesis presented is a recovery play; the current price-to-earnings (P/E) ratio of 25, while in line with its five-year average, is based on these temporarily depressed earnings. A normalization of cocoa supplies could allow profits to revert to 2024 levels, which would significantly lower the effective P/E and likely drive share price appreciation. This potential for capital gains is complemented by an attractive capital return profile, as the dividend yield stands at 2.9%, above its 2.2% five-year average, and has been increased for 16 consecutive years.

Key Decisions for Investors

• Investors could view the current valuation as an opportunity, as the P/E ratio of 25 is based on suppressed earnings, suggesting significant upside if cocoa supplies normalize and profits recover.
• The primary risk is the dependency on the cocoa market, so investors should closely monitor commodity prices and West African harvest reports as key catalysts for a turnaround.
• For income-focused portfolios, the 2.9% dividend yield, which is above its historical average and backed by 16 years of consecutive growth, offers a compelling return while awaiting potential stock price recovery.
• Given the stock has already rallied 35% from its recent lows, investors should weigh the recovery potential against the possibility that some of the positive outlook is already priced in.