Navigating Tariffs and Cocoa Inflation: Hershey's Financial Outlook in Focus

Hershey's financial outlook has been impacted by tariffs, cocoa inflation, and strategic adjustments. The company has updated its 2025 outlook to include tariffs, which are expected to significantly impact earnings per share. Despite announcing pricing strategies and a new savings initiative, ongoing cocoa inflation remains a concern. Hershey has raised its earnings estimates for 2025 and 2026, but uncertainties around tariff exemptions and economic conditions contribute to a Neutral stance.

The Hershey Company's financial outlook has been significantly impacted by a combination of factors, including tariffs, cocoa inflation, and strategic adjustments. The company has updated its 2025 outlook to reflect the expected impact of tariffs on earnings per share. Despite announcing pricing strategies and a new savings initiative, ongoing cocoa inflation remains a concern.

Bank of America Securities analyst Peter Galbo has reiterated a Neutral stance on Hershey's stock, giving it a Hold rating [1]. This rating is due to a combination of factors affecting the company's financial outlook. Tariffs are expected to have a significant impact on earnings per share, and while Hershey has announced pricing strategies in the U.S. confectionery segment to counteract these pressures, the ongoing cocoa inflation remains a concern. Additionally, Hershey's new savings initiative aims to improve gross margins, but the net impact of tariffs and cost inflation still poses challenges.

Hershey has raised its earnings estimates for 2025 and 2026, reflecting some optimism. However, the uncertainties around tariff exemptions for cocoa and broader economic conditions contribute to maintaining a Neutral stance. TD Cowen also maintained a Hold rating on the stock with a $204.00 price target [1].

The U.S. President Donald Trump's trade tariffs have been detrimental to the chocolate industry, increasing the cost of importing already-pricey cocoa and hurting the competitiveness of local factories versus Canadian and Mexican outfits that supply the U.S. [2]. Under the United States-Mexico-Canada free trade pact (USMCA), Canada and Mexico can export chocolate to the U.S. tariff-free no matter where they sourced their inputs of cocoa.

Hershey has estimated it would face $100 million in tariff costs in its third and fourth quarters if the levies remain in place [2]. Smaller firms like Taza Chocolate have no alternatives to U.S. manufacturing and have had to pay significant duties on cocoa imports. Taza has raised its wholesale prices by 10 percent since a year ago and is expecting further price hikes due to tariffs.

Despite these challenges, Hershey is navigating the environment by engaging with the U.S. government to seek an exemption for cocoa and by considering imports from its Canada and Mexico plants to mitigate tariff costs [2]. The company is also bracing for a bitter back half of the year, with tariff expenses estimated in the range of $170 million to $180 million, which will significantly impact its projected gross margins and adjusted earnings [3].

In conclusion, Hershey's financial outlook is subject to various uncertainties, primarily tariffs and cocoa inflation. The company is taking strategic steps to mitigate these impacts, but the overall outlook remains Neutral due to the ongoing uncertainties.

References:
[1] https://www.tipranks.com/news/ratings/hersheys-financial-outlook-navigating-tariffs-cocoa-inflation-and-strategic-adjustments-ratings?mod=mw_quote_news
[2] https://www.inc.com/reuters/trumps-tariffs-are-bad-news-for-u-s-chocolate-companies/91221283
[3] https://www.foodnavigator-usa.com/Article/2025/07/31/hershey-lowers-guidance-due-to-tariffs/