Episode
Tootsie Roll Stock: A Debt-Free Candy Fortress — But Why We Say HOLD After Q2 Earnings (TR)
- Published
- Jul 25, 2026
- Duration seconds
- 799
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Summary
Tootsie Roll Industries (TR) Q2 2026 — Tootsie Roll Industries (TR) reported a soft Q2 2026 (quarter ended June 30): net sales slipped ~1% to $151.9M, but net earnings fell 24% to $13.3M and EPS dropped to $0.18 from $0.23 a year ago. Management blamed a sales-timing shift from Q2 into Q3 and, more importantly, a margin squeeze from sharply higher cocoa and chocolate costs plus elevated energy, freight and packaging. First-half sales were $301.4M (+1%) with earnings of $31.0M (EPS $0.41 vs $0.47). The story with Tootsie Roll is the fortress balance sheet: ~$113M cash plus ~$483M of investments (~$596M total) against just ~$14M of debt — roughly $8/share of net cash and investments. The catch is the price: at ~$37.52 the stock trades ~27x earnings for a business that isn't growing and whose profit just fell. Because TR is a low-beta (0.4), bond-like name, we ran a blended owner-earnings DCF at a generous 6-8% discount and still land near $29 fair value — about 23% below the price. TR is essentially uncovered by Wall Street, so we anchor on our own model. Our call: HOLD. Tootsie Roll is one of the most beloved, most conservative companies on the market — a century-old candy maker (Tootsie Rolls, Tootsie Pops, Junior Mints, Dots, Andes, Charms Blow Pops) with essentially no debt and nearly $600M of cash and investments, run for decades by the Gordon family, who control a majority of the vote. The stock is so steady its beta is just 0.4 — it trades more like a bond than a stock. But Q2 2026 was soft: net sales dipped ~1% to $151.9M while net earnings fell 24% to $13.3M (EPS $0.18 vs $0.23) as record-high cocoa costs and elevated energy, freight and packaging squeezed margins. Management expects cocoa relief in the back half of 2026 into 2027. The real debate isn't quality…