For the last year, every market analyst with a sugar addiction has been saying the same thing: “This cocoa shortage is going to bury Hershey.”

And to be fair, they had a point. West Africa’s cocoa farms (where the world gets most of its chocolate) turned into a dusty wasteland. Between droughts, disease, and decades of underinvestment, cocoa supply fell off a cliff. And the numbers really tell the story. Cocoa prices increased 231% in 2024 calendar year. That’s a full-blown commodities heart attack.

Wall Street assumed Hershey would be left clawing through its inventory like a parent at CVS the night before Halloween. I mean, think about it… the company gets more than 80% of its revenue from chocolate. And to make matters worse, its stock is already down 39% from its 2023 highs. This quarter was supposed to be a disaster.

Instead… Hershey surprised everyone. In Q1, Hershey posted $2.81 billion in revenue… down 13.8% year-over-year, which isn’t great, but still better than the 14.1% drop analysts pretty much already had inked down on paper. More importantly, earnings per share came in at $2.09, easily topping Wall Street’s $1.95 estimate. That’s not the kind of result you expect from a company that supposedly can’t afford its own ingredients.

So what happened? Hershey leaned hard into its salty snack business… which has quietly become its “get out of jail free” card. Dot’s Pretzels and SkinnyPop may not be flashy, but they’re working… salty snack volumes were up 4%, even as prices dropped 3% to encourage demand. At the same time, chocolate sales sagged, but strategic price hikes (+2% overall) helped cushion the blow.

The company also cut back on ad spending (because when cocoa's up 231%, maybe it's not time for another Reese’s Christmas tree jingle). The result was that margins held together better than anyone expected. And instead of sitting back and hoping the weather in Ghana improves, Hershey just acquired LesserEvil, the organic snack brand for people who read labels and think Himalayan sea salt has healing powers. It’s part of a bigger move to diversify and build a portfolio that isn’t entirely tied to the fate of the cocoa crop.

Even while cocoa’s going vertical, Hershey keeps doing what Hershey does… pay dividends like clockwork. This quarter marked 95 straight years of dividend payments (380 quarters in a row) and they’ve increased that payout every single year since 2009. The current yield is 3.42%, nearly 3x the S&P 500 average and the highest it’s been since the Great Recession.

So while the stock’s still down, the income is very real… and very appealing for long-term investors. Hershey’s P/E ratio is now under 15… the lowest it’s been since the early 2000s, back when people still rented DVDs. On top of that, its price-to-sales ratio is hovering around early-pandemic lows.

And yes, cocoa prices are still high. They might stay that way for a while. But that’s exactly what makes this so interesting: Hershey is proving it can hold the line in worst-case conditions. If cocoa cools off? This could be one of the more overlooked rebound plays in the market.

Everyone expected a train wreck. What we got was a surprisingly stable earnings report, a smart snack strategy, a rock-solid dividend, and a stock trading at its cheapest valuation in years.

The cocoa shortage isn’t over. But if this was Hershey’s stress test, they just passed it… with chocolate to spare.

PS: The headlines are full of panic… inflation’s too high, the Fed’s asleep at the wheel, and Trump never fails to kill any market momentum with more tariffs. On the surface, it looks like the market’s barely breathing.

But underneath all that noise?

We’re seeing some of the fastest stock moves in years… especially in the small-cap space, where low float and high tension can trigger a 100% pop before lunch. Some are up 200% in under 24 hours… and nobody on CNBC is talking about them.

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Stock.News does not have positions in companies mentioned.