Mejora de HSY: La disminución de los precios del cacao + Alivio arancelario = Flexibilidad en el EPS?

The immediate financial relief for Hershey is a direct result of two specific, recent events. First, the price of cocoa has collapsed. On Friday, NY cocoa prices plunged 12.05%, hitting a 6-week low. This sharp drop provides an immediate, tangible reduction in a major raw material cost. Second, the U.S. government has removed a significant tax burden. In November, an executive order removed tariffs on cocoa and other agricultural goods, with the change applying retroactively to imports from November 14. This means Hershey can now recover duties paid on cocoa imports from that date forward.

The core event-driven thesis is that this combination creates substantial, near-term earnings flexibility. However, the market's reaction suggests much of this benefit is already priced in. Piper Sandler's upgrade notes that early cocoa cost savings were already being used for growth investments, meaning the new tariff relief is expected to flow directly to the bottom line. The catalyst is clear: a 12% weekly price drop in a key input, coupled with the recovery of past duties, provides a clean, immediate boost to margins. The question for investors is whether the stock has fully digested this good news or if there's still room for a pop.

Financial Mechanics: From Relief to Forward Estimates

The upgrade translates the cocoa and tariff relief into concrete financial modeling. Piper Sandler's new $213 price target represents a 10% jump from its prior view. The firm's rationale hinges on a valuation multiple expansion, raising its model for 2027 earnings to 27.5x EPS from 25.0x previously. This move implies the market should reward Hershey for improved growth visibility, not just cost savings.

Crucially, Piper's multiple expansion is based on conservative earnings estimates. The firm maintains a base case of $7.23 EPS for 2026 and $7.73 for 2027. This suggests the stock's re-rating is predicated on the company's ability to execute on its growth investments-like better-for-you snacks and international expansion-while the new tariff relief flows directly to profits. The multiple expansion is a bet on the trajectory, not the near-term level, of earnings.

Morgan Stanley echoes this view of a clearer path to acceleration. The firm sees potential for sustained double-digit growth through fiscal 2027, driven by improved visibility into both costs and demand. Its base case expects a roughly 20% total return, including the dividend, as earnings rebound from a difficult period. The key differentiator for Morgan Stanley is that Hershey's recovery is not yet reflected in consensus forecasts, creating a potential for upside surprises.

The bottom line is that the upgrade is forward-looking. It assumes the relief events have unlocked a new phase where growth investments can drive earnings, justifying a higher multiple. The current stock price likely reflects some of this optimism, but the models suggest room for further re-rating if Hershey can deliver on its expanded growth narrative.

The Trade Setup: Immediate Risk/Reward

The tactical opportunity here is defined by a clear, near-term catalyst and a balanced risk/reward profile. The average one-year price target of $195.00 implies roughly 8.8% upside from recent levels, but the wide range-from a low of $138 to a high of $231-highlights the significant debate. This dispersion captures the core tension: the relief events provide a solid floor for earnings, but the ultimate path depends on consumer response.

The immediate catalyst is the upcoming Q4 earnings report and the subsequent earnings call. This is where the market will test the thesis of "accelerating earnings growth." Evidence suggests the recovery is not yet in consensus forecasts, creating a potential for upside surprises if Hershey demonstrates that the new cost flexibility is translating into margin expansion and that category momentum is improving. Management's guidance on 2027 will be critical; any signal of sustained double-digit growth would likely validate the multiple expansion seen in recent upgrades.

The primary near-term risk is consumer elasticity. All the cost relief is meaningless if demand weakens. As one analyst note points out, elasticity trends around pricing remain important for how quickly earnings power is restored. The stock's recent price action and the wide target range suggest the market is pricing in some demand resilience, but any sign of volume softness could quickly offset the input cost benefits. The setup is therefore binary: strong execution on the cost side and demand holds, leading to a re-rating; or demand weakness emerges, capping gains despite lower cocoa prices.

For an event-driven strategist, the trade hinges on the next earnings call. The catalyst is clear, the upside is modest but positive, and the risk is well-defined. The stock has already seen a pop from the initial upgrade, so the next move will depend entirely on whether Hershey can deliver the acceleration that justifies the new, higher expectations.

Catalysts and Watchpoints: What to Watch Next

The upgraded thesis now hinges on a few specific, time-bound events. The first and most immediate is the upcoming Q4 earnings report and the subsequent call. This is where the market will test the promise of "accelerating earnings growth." Evidence suggests the recovery is not yet in consensus forecasts, creating a potential for upside surprises if Hershey demonstrates that the new cost flexibility is translating into margin expansion and that category momentum is improving, particularly in chocolate. Management's guidance on 2027 will be critical; any signal of sustained double-digit growth would validate the multiple expansion seen in recent upgrades.

The second key watchpoint is the sustainability of the cocoa price decline. Prices plunged 12.05% last week, hitting a 6-week low. This drop is driven by hedging ahead of the West African harvest, but the market will scrutinize whether this is a temporary oversold bounce or the start of a longer-term trend. Morgan Stanley notes that while its base case does not rely on further cocoa deflation, the bank sees meaningful upside if prices fall further, as even modest declines could translate into significant margin expansion. The stock's recent price action suggests the market is pricing in some resilience, but any sharp reversal would quickly undermine the cost relief narrative.

Finally, the next major data point is the cocoa harvest season itself. The current price action is partly a reaction to expectations around the upcoming West African crop. The size and quality of that harvest will directly influence supply and cost trends for the coming year. Favorable growing conditions, as noted in recent reports, are a positive, but any disruption or shortfall would reset the cost equation. For now, the harvest is a few months away, but it represents the fundamental supply story that will ultimately determine the durability of the current relief.

The bottom line is that the trade setup has moved from the initial catalyst to execution monitoring. Investors must watch the next earnings call for evidence of the promised acceleration, track cocoa futures for the sustainability of the recent plunge, and keep an eye on the harvest season for the longer-term cost outlook.