Halloween is just around the corner, but soaring candy prices are haunting candy makers. The rising costs of cocoa and sugar have driven candy prices higher. This is impacting consumer purchases, posing a challenge for top companies such as The Hershey Company (NYSE:HSY), Mondelez International (NASDAQ:MDLZ), Nestle (NSRGY), and Tootsie Roll (NYSE:TR).
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Recently, a Wall Street Journal report, citing data from the U.S. Bureau of Labor Statistics, noted that the prices of candy and gum had increased by 7.5% year-over-year in September. This is leading buyers to purchase less or look for cheaper alternatives.
Nonetheless, the National Retail Federation (NRF) expects Halloween spending on candy, decorative items, costumes, and other related items to increase to $12.2 billion this year compared to $10.6 billion in 2022. Specifically, NRF expects spending on candy to reach $3.6 billion in 2023, up from $3.1 billion last year. This could bring some respite to the candy makers.
With this backdrop, let’s look at what the future holds for these companies.
Analysts Favor Mondelez Stock
Candy makers are facing short-term challenges led by an inflationary cost environment. However, analysts remain optimistic about Mondelez stock. TipRanks’ Stock Comparison tool shows that Mondelez stock has a Strong Buy consensus rating.
Jefferies analyst Robert Dickerson noted that Mondelez’s “recent retail sales performance highlights company brand equity/category positioning strength relative to peers.” The analyst reiterated a Buy rating on MDLZ stock on October 24 and has a price target of $79. Overall, Mondelez stock sports a Strong Buy consensus rating on TipRanks, reflecting 12 Buy and two Hold recommendations. Meanwhile, the average MDLZ stock price target of $77.79 implies 19.66% upside potential from current levels.
Meanwhile, analysts remain cautiously optimistic about Hershey and Nestle stock. It’s worth noting that analysts have not rated Tootsie Roll stock. However, the firm expects higher input costs and timing related to Halloween sales will hurt its Q4 earnings.
Is Hershey a Good Stock to Buy Now?
Hershey’s management, during the Q3 conference call, said that the company witnessed a slight decrease in Halloween season demand. The company attributed it to affordability concerns among buyers. Additionally, the company highlighted that candy and other seasonal categories, such as decorations, costumes, and related items, also encountered challenges.
In a note dated October 26, Dickerson said inflation-driven pricing, a reduction in government assistance programs, and other factors have weighed on consumer spending. The analyst expects these headwinds to impact the company’s top-line numbers. Dickerson has a Hold rating on Hershey stock and a price target of $205. Overall, with eight Buy and eight Hold recommendations, HSY stock has a Moderate Buy consensus rating. Meanwhile, the average HSY stock price target of $222.19 implies 42.37% upside potential from current levels.
Is Nestle a Buy, Sell, Hold?
With one Buy and one Hold recommendation, Nestle stock has a Moderate Buy consensus Buy rating on TipRanks. Analysts’ average price target of $141 implies 31.59% upside potential from current levels.
Bottom Line
The inflation-driven higher prices will likely impact the demand for candy this Halloween. This keeps analysts cautiously optimistic about HSY and Nestle stocks. However, Mondelez’s resilient volume is enabling it to outperform its peers. This is reflected through analysts’ Strong Buy consensus rating and a “Perfect 10” Smart Score.
