Gifting chocolates and candies is a key part of celebrations during the winter holiday season. Thus, it’s prudent to keep an eye on the shares of candy makers like Hershey (NYSE:HSY) and Tootsie Roll Industries (NYSE:TR). While higher holiday sales are positives, valuation and higher input costs could play spoilsport.
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Before we dig deeper, it’s worth highlighting that HSY and TR stocks are up about 25% and 24% year-to-date. In comparison, the S&P 500 Index (SPX) is down about 20%. Further, data from the National Confectioners Association indicates that shares of candy makers could shine on the back of holiday sales. According to the National Confectioners Association, more than half of Americans will be gifting confectionery products this holiday, implying these stocks could benefit from higher sales.
Against this backdrop, let’s find out what TipRanks’ data indicates about these two stocks.
Is HSY Buy, Sell, or Hold?
HSY stock has a Moderate Buy consensus rating on TipRanks based on three Buy and eight Hold recommendations. Further, the stock has a limited upside potential of 1.83% based on analysts’ average price target of $240.20.
The favorable sales environment and benefits from its price increases could support HSY’s financials and its share price. During the Q3 conference call, HSY also raised its full-year sales growth outlook to 14-15% from 12-14%. Also, it increased its 2022 adjusted EPS growth guidance to 14-15% from 12-14%. While these developments are positives, Jefferies analyst Robert Dickerson sees Hershey’s “valuation full” and recommends a Hold on the stock.
It’s worth highlighting insiders sold HSY stock worth $4M in the last three months. Meanwhile, HSY stock has an Outperform Smart Score of eight.
Is TR Stock a Buy?
TR stock benefitted from higher sales, led by solid demand and price increases. However, it carries a Neutral Smart Score of seven on TipRanks. Our data shows that investors holding portfolios on TipRanks are optimistic about TR stock. Further, hedge funds bought 9.5K TR stock last quarter. Interestingly, the stock has not been rated by any analysts over the past few months.
While TR could benefit from higher sales during the holiday season, higher costs of ingredients and packaging materials could remain a drag. Further, Spruce Point, an investment management company, has raised concerns about TR’s valuation and expects input cost inflation to hurt TR’s cash flows.
Bottom Line
Sales-driving events like the winter holiday season will positively impact the sales of these confectionery companies. However, cost headwinds and valuation concerns could restrict the upside potential of these stocks.
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