Hershey Q3 2026: adjusted EPS doubled to $2.64 on 11% higher prices as volume fell 10%

Hershey's third quarter of 2026 (the three months to September 27, 2026) doubled its profit while selling noticeably less candy. Net sales rose 3.0% to $3,275.5 million, but that growth came from two places other than volume: prices about 11% higher and the LesserEvil snack acquisition (2.1 points). Volume — how much product actually shipped — fell about 10%. Reported diluted earnings per share (EPS) rose 111.8% to $2.88, and adjusted EPS, which strips out hedging swings and one-time costs, rose 103.1% to $2.64. Part of that adjusted figure, about $0.22 a share, is a one-time refund of tariffs Hershey had paid earlier.

Key figures

Source: Hershey's October 29, 2026 earnings release (Form 8-K, Exhibit 99.1). The full 10-Q for the quarter is not filed yet, so the cash flow statement and detailed management discussion are not available.

Segments: candy margins soared, snacks and International went the other way

North America Confectionery (81% of sales: chocolate, candy, gum and mints in the US and Canada) is where the profit came from. Segment income rose 66.2% to $949.7 million. The release credits price, savings from Hershey's cost program (the "Advancing Agility & Automation" initiative), tariff refunds and "lower net commodity costs", partly offset by lower volume and more advertising. The volume loss of about 11% is the biggest warning sign: the release puts it down to "price elasticity" — people buying less because prices went up — plus normal shipment timing. Retail sales at the checkout for US candy, mint and gum rose only 0.8% over the 12 weeks to September 27, and Hershey lost market share, which it attributes to lapping a large Reese's launch a year earlier.

North America Salty Snacks (SkinnyPop, Dot's Homestyle Pretzels, LesserEvil) grew sales 22.3%, but about 20 points of that is LesserEvil; organic growth was 2.3%. Retail sales excluding LesserEvil rose 4.0% and Hershey gained share, so consumer demand is healthier than in candy. Profit is not: segment income fell 17.9% to $47.4 million and margin dropped 5.9 points to 12.1%, on higher freight, logistics and manufacturing costs, higher commodity costs and more marketing. Q2's margin was 16.1%, so this got worse, not better.

International (7% of sales) shrank 7.5% and its loss widened to $30.0 million from $13.6 million. Volume fell about 14% on shipment timing, deliberately dropping some products in some markets, and price elasticity; higher input and manufacturing costs did the rest.

Spending is rising too: advertising was up 17.1%, and other selling and administrative costs up 14.5%, driven by "capability and technology investments". Unallocated corporate expense rose 10.3% to $213.1 million.

What the headline numbers hide

• Hedging gains inflate the GAAP figure. Hershey buys cocoa and other ingredients with futures contracts, often a year or more ahead. Those contracts are revalued to market price every quarter ("mark-to-market"), and the gain or loss hits reported profit before the chocolate made from that cocoa is sold. This quarter that produced a $113.4 million pre-tax gain, worth $0.56 per share, against $0.12 a year ago. That is why GAAP EPS ($2.88) is above adjusted EPS ($2.64). Adjusted EPS is the fairer measure here.
• The adjusted figure carries a one-off too. Hershey's guidance footnote says adjusted EPS "includes approximately $0.22 from tariff refunds received in Q3 2026". Hershey does not strip those out of adjusted results. Without them, adjusted EPS would be about $2.42 — up about 86% rather than 103%. The release also lists tariff refunds among the drivers of gross margin and North America Confectionery profit.
• Acquisition costs went the other way. Integration costs for LesserEvil and Sour Strips (including changes in the estimated earn-out payment) were $36.4 million vs $1.6 million, and restructuring charges $13.3 million vs $10.6 million. These reduce GAAP profit and are excluded from adjusted.
• The tax rate barely helped. The adjusted tax rate was 24.4% vs 26.7%, worth a few cents, not the main story. Diluted shares fell only 0.9%, so buybacks explain very little of the EPS jump.
• The base was weak. Q3 2025 was squeezed by record cocoa costs (adjusted gross margin was 31.8% then, against 42.7% now). Much of the 103% growth is a recovery to normal margins rather than a new level of earning power.
• Cash conversion can't be checked yet. The release has no cash flow statement. Receivables were $1,113.4 million at quarter-end vs $729.5 million in December, but Q3 always carries Halloween shipments, and the release gives no year-ago September balance for a fair comparison.

On balance the quarter is flattered: GAAP EPS includes $0.56 of hedging gains, and even adjusted EPS includes about $0.22 of one-time tariff refunds — the business underneath grew adjusted EPS roughly 86%, not 103%, while selling about 10% less.

Takeaway: Hershey's earnings recovery is real — cheaper cocoa and higher prices took adjusted operating margin from 13.3% to 23.0% — but it is being bought with volume. North American candy shipped about 11% less and lost share, and the full-year guidance implies Q4 adjusted EPS roughly flat to up 9%, so the easy margin gains are close to played out.

Did last time's read hold up?

Our Q2 2026 report named three risks to watch: further volume erosion in North American candy, a salty snacks business growing mainly by acquisition while its margin shrank, and a money-losing International segment. All three continued. Candy volume fell about 11% (Q2: about 10%); salty snacks margin fell to 12.1% (Q2: 16.1%); International lost $30.0 million (Q2: $5.1 million). On the other side, the profit recovery we expected from cheaper cocoa arrived faster than guided, which is why the full-year outlook went up.

Outlook

Management raised its 2026 earnings outlook and trimmed the organic sales outlook. The outlook excludes any future tariff refunds.

The adjusted range includes about $0.25 of tariff refunds already received ($0.22 in Q3, $0.03 in Q2). Hershey also expects a tax rate of about 25%, about $200 million of interest expense, about $450 million of capital spending and about $100 million of cost-program savings.

Our read: nine-month adjusted EPS was $6.89, so the full-year range implies $1.69–$1.85 for Q4. Q4 2025 adjusted EPS was $1.69 (full-year $6.31 minus $4.62 for the first nine months), so the guide implies Q4 growth of 0% to about 9% — a sharp slowdown from 103% this quarter. On sales, nine-month organic growth was 4.0%, so a full year of about 3% implies Q4 organic sales roughly flat or slightly down. The pattern is consistent: the cocoa-driven margin rebound is now in the base, and from here Hershey has to grow by selling more, which it has not done all year. The things to watch in Q4 are whether candy volume declines narrow from about 11%, whether salty snacks margin stops falling, and how much of the 2025 price increase Hershey keeps as retailers see cocoa prices well below their peak.