Is Hershey (HSY) a Sell or a Buy in 2026?

The Hershey Company (HSY) has long been a staple of the confectionery sector, but its recent performance has sparked debate among investors. With a Q3 2025 earnings beat, a mixed guidance outlook, and valuation metrics that suggest a premium, the question remains: Is HSY a buy or a sell in 2026? This analysis examines the interplay between valuation dislocation and earnings momentum to determine whether the stock is undervalued or overvalued amid sector underperformance and evolving cost pressures.

Earnings Momentum: A Mixed Picture

Hershey's Q3 2025 results showcased resilience in pricing and product diversification. The company reported adjusted EPS of $1.30, surpassing the Zacks Consensus Estimate of $1.09, while net sales grew 6.5% year-over-year to $3.18 billion. This growth was driven by a 10% increase in the North America Salty Snacks segment and a 12.1% rise in International sales according to the company's report. However, gross margins contracted by 850 basis points to 31.8%, reflecting the drag from higher commodity and tariff costs as detailed in financial analysis.

The company's full-year 2025 guidance-3% revenue growth and a 36-37% decline in adjusted EPS-highlights the tension between top-line expansion and margin compression. For 2026, Hershey expects to return to its long-term growth trajectory, with revenue growth of 2%-4% and potential EPS upside despite an additional $200 million in tariff expenses. Analysts project 2026 EPS at $7.06 and revenue of $12.1 billion, representing 5.45% growth. While these estimates suggest cautious optimism, they also imply a reliance on cost-saving initiatives like the $400 million "Triple A" program to offset inflationary pressures.

Valuation Dislocation: A Premium Amid Sector Underperformance

Hershey's valuation metrics tell a different story. As of October 2025, the stock trades at a Forward P/E ratio of 32.03, significantly above the industry average of 21.92. Its PEG ratio of 4.58 further underscores the premium, indicating that the market is pricing in robust earnings growth that may not materialize. For context, a PEG ratio above 1 typically signals overvaluation, especially when growth expectations are unmet.

The disconnect between valuation and fundamentals is stark. While Hershey's stock has underperformed its sector-declining 2.3% over the past month versus 1.5% for the industry average-analysts maintain a Zacks Rank #3 (Hold), reflecting a neutral outlook according to financial reports. This suggests that the market is neither bullish nor bearish, but the high valuation multiples imply that investors are paying for stability rather than growth. A DCF analysis even suggests an intrinsic value of $100.50 per share, far below the current price, hinting at potential overvaluation.

Insider Trading: Confidence or Caution?

Insider activity in 2025 reveals a nuanced picture. Executives like CEO Kirk Tanner and CFO Steven Voskuil engaged in both purchases and sales. For instance, Tanner bought 370,915 shares at $185.46 in November 2025, while Voskuil sold 282,765 shares at $188.51 in December. These transactions suggest a mix of confidence in the stock's long-term potential and tactical portfolio management. However, the absence of clear directional bias among insiders complicates the interpretation of these signals.

The Case for a Sell

The primary argument for a "sell" in 2026 centers on valuation dislocation. Hershey's Forward P/E and PEG ratios are elevated relative to its growth prospects, particularly given the persistent cost pressures from tariffs and commodity inflation as reported in industry analysis. Analysts project an average annual EPS growth of 9.63% from 2026 to 2028, but this rate lags behind the confectionery industry average. If the company fails to deliver on these expectations-due to margin compression or slower-than-anticipated cost savings-the stock could face downward pressure.

Additionally, the sector's underperformance raises concerns about broader demand trends. While Hershey's pricing power and product diversification (e.g., salty snacks) are strengths, these may not be enough to justify a 32x Forward P/E in a sector grappling with shifting consumer preferences and macroeconomic headwinds.

The Case for a Buy

Conversely, Hershey's earnings momentum and strategic initiatives present a compelling case for a "buy." The Q3 2025 beat demonstrated the company's ability to navigate cost pressures through pricing and product mix optimization. The "Triple A" program's $400 million in cost savings over three years could further insulate margins, and the 2026 guidance hints at a return to growth. For investors with a longer-term horizon, the current valuation may reflect a temporary dislocation rather than a fundamental flaw.

Moreover, the stock's recent insider purchases-particularly by top executives-signal confidence in the company's strategic direction. If Hershey can execute its cost-saving initiatives and stabilize margins, the current premium valuation could be justified by improved earnings performance.

Conclusion: A Sell with Caution

While Hershey's earnings momentum and strategic initiatives are encouraging, the valuation metrics suggest a stock that is overpriced relative to its growth prospects. The Forward P/E and PEG ratios are too high for a company facing persistent cost pressures and sector-wide challenges. Unless Hershey can deliver on its cost-saving targets and demonstrate stronger margin resilience, the stock appears more aligned with a "sell" recommendation in 2026. Investors seeking growth may find better opportunities in undervalued peers with more attractive risk-reward profiles.