Hershey Upgraded by Piper Sandler Amid Easing Cocoa Costs

Piper Sandler has upgraded Hershey Company (HSY) to 'Overweight' from 'Neutral', citing a notable reduction in cocoa prices that is expected to ease cost pressures on the confectionery giant. The firm notes that cocoa futures have declined approximately 18% year-to-date as of early January 2026, with ICE Cocoa futures trading around $3,450 per metric ton—down from a peak of $4,200 in mid-2024. This decline directly benefits HSY’s gross margin, which had been under strain due to high input costs in 2023 and 2024. The upgrade underscores the importance of commodity price stability for consumer staples companies, particularly those with high reliance on agricultural inputs. Hershey’s recent annual report disclosed that cocoa and sugar costs accounted for roughly 40% of its total manufacturing expenses in fiscal 2024. With cocoa now trading at levels not seen since 2022, analysts project a 150–200 basis point improvement in HSY’s gross margin by Q3 2026. The market has responded positively, with HSY shares rising 3.2% in early trading following the announcement. The upgrade also signals broader confidence in the company’s pricing power and brand resilience, particularly in the North American market where Hershey maintains a 38% share of the chocolate confectionery segment. Investors are now reassessing HSY’s earnings outlook, with consensus estimates for 2026 EPS increasing by 7% over the past month. The move impacts not only HSY’s equity valuation but also related commodity and retail sectors. Traders are monitoring cocoa supply forecasts from West Africa, where harvests are expected to rebound after drought-related shortfalls in 2023 and 2024. A sustained decline in cocoa prices could also influence margin performance at other major confectionery firms, including Mondelez (MDLZ) and Nestlé (NSRGY).