the value of hsy

[Kerim]

I have trouble getting as excited about HSY as others. I agree it is a great business, and I of course love their products. But I'd need to see a huge price drop to consider getting in.

I'm skeptical of HSY's guidance and analyst expectations for 2015. It is a problem that I complain about a lot with respect to earnings, but those $4 estimates are on an "adjusted" basis. HSY's reported Q2 EPs was a LOSS of 47 cents per share -- a far cry from the "adjusted" POSITIVE 78 cents they claimed. The difference between those two numbers was explained this way in the Q2 presentation:

Quote:Additionally, the company performed an initial assessment of the fair value of the Shanghai Golden Monkey (SGM) business as a result of several contributing factors. Thus far in 2015, SGM net sales and profitability have been significantly lower than initial expectations. In addition, as part of the ongoing integration process, the company has continued to assess the quality of SGM’s accounts receivable and existing distributor networks. As a result of this assessment, the company has recorded an initial non-cash goodwill impairment charge of $249.8 million, or $1.13 per share-diluted. The company expects to finalize its valuation assessment in the third quarter of 2015 and additional charges, including charges related to other long-lived assets, may be required.

Again, great company. But I think the 2015 earnings numbers are soft, and as a result, the payout ratio is a lot higher than it looks at the moment. With the general market swoon of late, I'd say there are much better bargains out there at the moment.