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Hershey (HSY) Q3 2026 Earnings: Profit Doubles, Volume Falls 11 Points

Ddrillr ResearchOriginal research

Published Oct 30, 20265 min read

Summary

Hershey Q3 2026 adjusted EPS rose 103.1% to $2.64 as cocoa costs eased, but about $0.22 came from tariff refunds, confectionery volume fell about 11 points and salty snacks margin hit 12.1%.

Hershey (HSY) Q3 2026 earnings showed the expected profit recovery from lower cocoa costs, while volume and salty snacks profitability weakened further. The Hershey Company reported results for the third quarter ended September 27, 2026 in its 8-K earnings release and 10-Q filed on October 29, 2026 [1][2]. Earlier research tracked three questions: whether earnings would post their fastest growth of the year against the 2025 cost peak, whether North America Confectionery volume would steady as pricing began to lap, and whether salty snacks margins would recover. The first was confirmed. Adjusted earnings per share were $2.64, up 103.1%, and about $0.22 of that came from one-time tariff refunds [1]. The other two moved in the wrong direction. Taken together, the company's full-year earnings outlook excluding the refund did not rise, while its sales outlook was lowered.

Hershey is the largest chocolate and candy company in North America, with brands such as Hershey's and Reese's. North America Confectionery accounts for about 80% of sales, and its largest customer, McLane, accounted for about 27% of 2025 consolidated net sales [3]. The company earns most of its profit from branded candy, so profit depends heavily on cocoa and other raw material costs, which it generally hedges 3 to 24 months ahead [2].

Progress: lower costs doubled quarterly earnings

The third quarter delivered on management's July view that it would show the strongest year-over-year earnings growth of 2026 [4]. Adjusted gross margin was 42.7%, up 1,090 basis points from a year earlier and above the second quarter's 41.6%. North America Confectionery segment margin was 35.8%, up 1,400 basis points [1]. The company attributed the gain to net price realization, productivity savings, tariff refunds and lower net commodity costs, which more than offset lower volume and higher freight costs [1].

The tariff refund means the full-year guidance increase should be read with care. Based on diluted shares and the tax rate, the roughly $0.22 refund in the third quarter equals an estimated $59 million before tax, or about 1.8 percentage points of net sales. Excluding it, adjusted gross margin was about 40.9%, slightly below the second quarter. Hershey raised its full-year adjusted EPS growth outlook from 32.5% to 35% to a range of 36% to 38.5%, or $8.58 to $8.74. Both ends are about $0.22 higher, roughly equal to the refund [1]. Subtracting the $6.89 earned in the first nine months, the outlook implies fourth-quarter adjusted EPS of $1.69 to $1.85, against $1.69 a year earlier, so growth slows sharply.

Change one: North America Confectionery volume fell faster

Pricing in North America Confectionery did not narrow clearly, and the volume decline widened. Organic net sales in the segment rose only 1.6% in the third quarter, with net price realization of about 13 points and volume down about 11 points. In the second quarter, those figures were about 14 points and a decline of about 10 points [1]. The 10-Q attributes the volume decline mainly to price elasticity [2].

Retail data were also soft. For the 12 weeks ended September 27, Hershey's U.S. candy, mint and gum retail takeaway rose only 0.8% and its market share declined. The company attributed this to the comparison with a large Reese innovation launch a year earlier [1]. Hershey cut its full-year organic net sales growth outlook from 3% to 3.5% to about 3% [1]. With nine-month organic growth of 4.0%, that implies roughly flat company-wide organic growth in the fourth quarter, when the 2025 price increase begins to lap.

Change two: salty snacks margin kept falling

Cost pressure in salty snacks did not ease as management had expected in July [4]. Third-quarter segment income was $47.4 million, down 17.9%. Segment margin was 12.1%, down 590 basis points from a year earlier and below the second quarter's 16.1% [1]. The company cited higher freight, logistics, manufacturing and commodity costs, plus higher consumer marketing [1][2].

Demand in the segment remained healthy. Excluding LesserEvil, U.S. retail takeaway rose 4.0% and market share increased. Organic net sales rose 2.3%, which the company explained by a planned reduction in private label production [1]. The acquisition added revenue, but segment profit declined. The International segment posted a $30.0 million loss in the quarter, and its organic net sales fell 9.7% [1].

Conclusion

The third quarter confirmed the size of Hershey's profit recovery and showed that it came mainly from costs and pricing. On growth, North America Confectionery revenue depended almost entirely on price. On profit, the improvement included a one-time refund, and the full-year guidance increase matched that refund. On cash, operating cash flow for the first nine months was $1.639 billion, compared with $1.351 billion a year earlier [2]. The next tests are whether the volume decline narrows in the fourth quarter, whether salty snacks margin stops falling, and whether the cocoa futures rebound in the third quarter affects cost declines in 2027 [2]. The release and the 10-Q did not give management's latest view on 2027, and that remains the main uncertainty.