The Hershey Company’s (HSY - Free Report) earnings and revenues beat the Zacks Consensus Estimate in third-quarter 2017. Growth in its core brands, successful innovation and progress in multi-year productivity, and cost-saving initiatives helped the company post better numbers.

Earnings & Revenue Discussion

Hershey’s third-quarter adjusted earnings per share of $1.33 beat the Zacks Consensus Estimate of $1.28 by 3.9%. Earnings also increased from the year-ago profit level of $1.29 by 3.1%.

Net sales of $2.03 billion surpassed the Zacks Consensus Estimate of $2 billion. Net sales also improved 1.5% year over year owing to strong demand for Kisses, Kit Kat and Chocolate Dipped Pretzels. This marks the sixth straight quarter of sales rise after a few quarters of no growth.

Organically, excluding the impact of currency, sales increased 1.1% as demand strengthened in the United States.

Volume grew 0.7% while net price realization had a 0.4% benefit. Currency favorably impacted revenues by 0.4%.

Hershey Company (The) Price, Consensus and EPS Surprise

Hershey Company (The) Price, Consensus and EPS Surprise | Hershey Company (The) Quote

Quarterly Segment Discussion

North America (U.S. and Canada) net sales increased 1.6% to $1.79 billion and currency benefited sales by 0.3%. Pricing benefited 0.3%, while volumes increased 1.6%.

Third-quarter net sales at the International and Other segment grew 0.8% to $240.7 million. Currency had a positive impact on sales by 1.3%. Excluding currency, sales declined 0.5% due to pricing gains. While volumes posed a 5.2% headwind, pricing benefited 4.7% to sales.

Constant currency sales were solid (about 8%) in Mexico, Brazil and India. Net sales in China remained on par with the year-ago level.

Margins Detail

Hershey’s adjusted gross margin declined 30 basis points (bps) to 45.3% due to higher freight rates as well as manufacturing and distribution costs. Again, unfavorable sales mix also had a negative impact on gross margins.

Cost of sales dropped 5.2% to $1.1 billion in the third quarter. Again, total advertising and related consumer marketing expenses increased 3.7% from the third-quarter 2016 level.

Adjusted operating margin contracted 30 bps to 22%.

The adjusted effective tax rate was 30.4%, lower than 30.7% in the prior-year quarter.

Hershey also approved a new $100 million stock repurchase authorization.

2017 Guidance

Net sales are expected to be about 1.25%. Adjusted gross margin will likely increase about 25 bps compared with the prior expectation of about 50 bps.

The company now expects foreign currency to have a neutral effect on sales. Previously, it was expected to be around 0.25%.

The company reaffirmed its adjusted EPS guidance range of $4.72-$4.81, reflecting a 7-9% increase from last year.

Zack Rank & Upcoming Peer Releases

Hershey currently carries a Zacks Rank #2 (Buy).

Mondelez International, Inc. (MDLZ - Free Report) is slated to report third-quarter numbers on Oct 30.

B&G Foods Inc. (BGS - Free Report) is scheduled to report quarterly results on Oct 31.

The Kraft Heinz Company (KHC - Free Report) is set to report third-quarter results on Nov 1.