Three Predictions for Hershey Co (HSY) Stock

When it comes to investing in big, publicly owned candy companies, investors don’t have a lot of options to choose from. The giants of the industry, including Mars, Kraft — now Mondelez International Inc (NASDAQ:MDLZ) — and even Berkshire Hathaway Inc. (NYSE:BRK.A), have gobbled up most of the small fries, absorbing once-famed small-batch brands into the conglomerate that is Big Candy.

Probably the best-known, still-independent candy concern out there that’s still investable is Hershey Co (NYSE:HSY). But is Hershey Co (NYSE:HSY) stock worth investing in? Let’s find out. We’ll start off with a couple of predictions from the professionals on Wall Street, and then I’ll give you a prediction of my own.

Prediction No. 1: So-so sales
Wall Street analysts see Hershey Co (NYSE:HSY) growing its sales by about 23% over the next five years. That’s roughly equal to the projections for industry giant Mondelez, at 23%, but it’s also a bit surprising. Mondelez International Inc (NASDAQ:MDLZ)’s annual sales are already more than five times bigger than Hershey’s — $35 billion, versus only $6.6 billion.

Ordinarily, you’d expect Mondelez International Inc (NASDAQ:MDLZ) to be running into the “law of large numbers” right about now and struggling to outgrow smaller Hershey, which presumably has more room to grow. But it’s not. It’s actually expected to outperform Hershey slightly in the growth race.

At the same time, tiny Tootsie Roll Industries, Inc. (NYSE:TR) may see its sales grow as little as 13% through 2016. Could it be that in the candy industry, bigger is better? Does Hershey lack the scale to compete effectively against mammoth Mondelez?

Prediction No. 2: Smarter earnings
Or is Hershey just growing smarter than Mondelez? A chart of how these three candy companies’ earnings are expected to perform in coming years suggests this possibility — because even if Mondelez grows sales growth faster than Hershey Co (NYSE:HSY) does in future years, analysts expect Hershey stock to be far and away the faster grower of profits.

On average, the consensus of analyst estimates says that Hershey’s earnings will rise 68% over the next five years, while Mondelez settles for 39% growth, and little Tootsie Roll Industries, Inc. (NYSE:TR) ekes out a living on just 15% growth.