Reviewing Hershey (HSY) and Kraft Heinz (KHC)

Kraft Heinz (NASDAQ: KHC) and Hershey (NYSE:HSY) are both large-cap non-cyclical consumer goods & services companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, risk, valuation, dividends, profitability, earnings and institutional ownership.

Insider & Institutional Ownership

62.1% of Kraft Heinz shares are held by institutional investors. Comparatively, 51.3% of Hershey shares are held by institutional investors. 26.9% of Kraft Heinz shares are held by company insiders. Comparatively, 0.9% of Hershey shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Kraft Heinz and Hershey’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kraft Heinz $26.49 billion 3.66 $3.63 billion $3.21 24.78
Hershey $7.44 billion 3.23 $720.04 million $3.36 33.97

Kraft Heinz has higher revenue and earnings than Hershey. Kraft Heinz is trading at a lower price-to-earnings ratio than Hershey, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Kraft Heinz and Hershey, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kraft Heinz 0 4 10 0 2.71
Hershey 1 7 4 0 2.25

Kraft Heinz currently has a consensus target price of $92.54, indicating a potential upside of 16.34%. Hershey has a consensus target price of $114.25, indicating a potential upside of 0.10%. Given Kraft Heinz’s stronger consensus rating and higher possible upside, equities analysts clearly believe Kraft Heinz is more favorable than Hershey.

Profitability

This table compares Kraft Heinz and Hershey’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kraft Heinz 15.03% 7.49% 3.63%
Hershey 9.52% 124.06% 19.16%

Dividends

Kraft Heinz pays an annual dividend of $2.50 per share and has a dividend yield of 3.1%. Hershey pays an annual dividend of $2.62 per share and has a dividend yield of 2.3%. Kraft Heinz pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hershey pays out 78.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Kraft Heinz has raised its dividend for 7 consecutive years. Kraft Heinz is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Kraft Heinz beats Hershey on 12 of the 16 factors compared between the two stocks.

Kraft Heinz Company Profile

The Kraft Heinz Company is a food and beverage company. The Company is engaged in the manufacturing and marketing of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. The Company’s segments include the United States, Canada and Europe. The Company’s remaining businesses are combined as Rest of World. The Rest of World consists of Latin America and Asia, Middle East and Africa (AMEA). The Company provides products for various occasions whether at home, in restaurants or on the go. The Company’s brands include Heinz, Kraft, Oscar Mayer, Philadelphia, Planters, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida. The Company’s products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, drug stores, value stores, bakeries and pharmacies.

Hershey Company Profile

The Hershey Company is a producer of chocolate in North America. The Company’s principal product offerings include chocolate and non-chocolate confectionery products; gum and mint refreshment products; pantry items, such as baking ingredients and beverages, and snack items, such as spreads, meat snacks, bars and snack bites and mixes. Its segments include North America, and International and Other. The North America segment includes its chocolate and non-chocolate confectionery business, as well as its grocery and snacks business. This includes developing and growing its business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines. The Company distributes and sells confectionery products in export markets of Asia, Latin America, the Middle East, Europe, Africa and other regions. As of December 31, 2016, the Company marketed, sold and distributed its products under more than 80 brand names in approximately 70 countries across the world.

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