Hershey Co's Long-Term Growth Potential in a Shifting Consumer Landscape

A visual representation of the U.S. confectionery market, showing Hershey's 36% market share alongside competitors like Mars and Mondelez, with icons depicting cocoa price trends and dividend growth over time.

The confectionery sector, long a staple of consumer staples portfolios, is undergoing a transformation driven by shifting demand patterns, input cost volatility, and strategic leadership changes. For Hershey Co (HSY), these dynamics present both challenges and opportunities. UBS's recent price target upgrade to $192-its third adjustment in 2025-reflects a nuanced view of the company's ability to navigate these headwinds while maintaining its market leadership. This analysis explores Hershey's strategic resilience and valuation appeal, contextualized within broader industry trends and UBS's evolving assessment.

Strategic Resilience: Innovation, Leadership, and Cost Management

Hershey's dominance in the U.S. confectionery market-where it holds a 36% share-rests on a foundation of brand strength and operational agility. According to a Monexa.ai analysis, the company's 2024 financial performance underscored its resilience, with a 19.31% increase in net income and improved gross and operating profit margins. However, 2025 has introduced new pressures, including cocoa price volatility, which the Monexa.ai analysis projects will compress gross profit margins by 650 to 700 basis points. To counter this, Hershey has implemented a 12% price increase on half its product lines and aims to achieve $300 million in productivity savings by 2026, according to an InvestorsHangout analysis.

The appointment of Kirk Tanner as CEO in July 2025 marks a pivotal strategic shift. With a background in fast-moving consumer goods (FMCG) and quick-service restaurants (QSR), Tanner's leadership is expected to drive innovation and operational efficiency, a point noted by the Monexa.ai analysis. This aligns with UBS's earlier optimism in April 2025, when the firm raised its price target to $175 from $159, citing Hershey's innovation pipeline and expected outperformance in the sweets category, as discussed in the InvestorsHangout analysis.

Valuation Appeal: A Cautious Optimism

UBS's Neutral rating and August 2025 price target of $192 reflect a tempered outlook, as reported in a MarketScreener article. The analyst noted that the stock's current valuation-trading at a P/E ratio of 25.14-may already incorporate anticipated 2026 improvements. This contrasts with the firm's earlier downgrade in May 2025, when it cut the price target to $170 amid weaker consumer demand and tariff uncertainties, a change detailed in the Monexa.ai analysis.

Hershey's valuation metrics remain a double-edged sword. While its strong dividend history (14 consecutive years of increases) offers stability, a payout ratio of 65.72% raises concerns about sustainability amid margin compression, as highlighted in the InvestorsHangout analysis. The company's forward P/E is expected to decline to 14.89x by 2029, suggesting anticipated earnings growth, but UBS warns of potential downward revisions if cost pressures persist (MarketScreener).

Data query for generating a chart: Line graph comparing Hershey's P/E ratio (2023–2025), UBS's price targets (May 2025 to August 2025), and the average analyst price target ($171.22) versus UBS's $192. Include annotations for cocoa price trends and dividend payout ratios.

Broader Market Dynamics and Competitive Positioning

The confectionery sector's growth is increasingly tied to innovation and global expansion. Hershey's acquisition of Sour Strips and its focus on digital engagement highlight its efforts to diversify revenue streams, according to InvestorsHangout coverage. However, competitors like Mars and Mondelez are also investing in premiumization and sustainability, intensifying competition.

UBS's caution is echoed by other analysts, with a mean price target of $179.40 and an average rating of "Hold," as noted in the InvestorsHangout coverage. This consensus suggests that while Hershey's long-term prospects remain intact, near-term execution risks-such as the success of its productivity initiatives and cocoa hedging-will be critical.

Conclusion: Balancing Optimism and Prudence

Hershey's strategic resilience lies in its ability to adapt to a volatile input cost environment while maintaining brand relevance. UBS's upgraded price target to $192 signals confidence in the company's long-term trajectory, particularly under Kirk Tanner's leadership. However, the Neutral rating underscores the need for investors to monitor near-term challenges, including cocoa price fluctuations and consumer demand shifts.

For investors, Hershey represents a compelling case study in balancing innovation-driven growth with valuation discipline. While the stock's current premium valuation may deter some, its robust market share, dividend history, and strategic initiatives position it to outperform in a sector where resilience is paramount.