UPDATE 3-Hershey stock hits high on sweet sales, forecast

* EPS $0.64 vs Wall St $0.47 view

* Net sales up 13.9 percent

* Sees FY net sales rise 6 pct vs earlier view 3-5 pct

* Sees adj FY EPS up “low-to-mid-teens” pct

* Shares rise as much as 7.4 percent
(Adds analyst comments, industry background, stock movement

By Phil Wahba

NEW YORK, April 22 (BestGrowthStock) – Hershey Co (HSY.N: ) said
quarterly profit nearly doubled, helped by higher prices for
the Valentine’s Day and Easter holidays, and the U.S. chocolate
maker also raised its full-year forecast, sending shares to a
nearly three-year high on Thursday.

Hershey benefited from better-than-expected sales volumes
and higher prices, as well as an overhaul of its supply chain
during the quarter.

The results and forecast seemed to assuage investors’ fears
that Hershey would suffer as a relatively small player as it
faces stepped-up competition after Kraft Foods Inc (KFT.N: )
bought British candymaker Cadbury earlier this year.

Shares rose as much as 7.4 percent to $48.16, the highest
level since August 2007, and were still up 5.7 percent at
$47.38 on the New York Stock Exchange in early afternoon.

“They are benefiting from investment in their supply chain
as well as marketing in their core brands,” said Morningstar
analyst Erin Swanson.

Across the Atlantic, rival Nestle (NESN.VX: ), the world’s
largest food group and maker of Nescafe coffee and Kit Kat
chocolate bars, also reported growth in all regions and
categories. The Swiss company kept its upbeat outlook for the
rest of 2010. [ID:nLDE63K1N8]

Hershey’s profit rose 94.2 percent, hitting $147.4 million,
or 64 cents a share, in the first quarter, compared with $75.9
million, or 33 cents a share, a year earlier.

Analysts were expecting 47 cents per share, according to
Thomson Reuters I/B/E/S.

During the first quarter, which ended April 4, sales rose
13.9 percent to $1.41 billion, beating analysts’ forecasts of
$1.29 billion. Net margin rose 4.4 percentage points to 10.5

The company expects full-year sales to rise to at least 6
percent, up from an earlier range of 3 to 5 percent.

Hershey also forecast adjusted earnings per share to rise
by low to mid-teen percentage points. Earlier it had forecast
an increase of between 6 and 8 percent.

It is also betting that new products will spur sales.
Hershey said that the December launches of new products such as
Hershey’s Special Dark and York Pieces “are off to a strong
start” and credited the company’s advertising efforts.


Hershey has benefited from a better U.S. economy, and also
from the fact that the momentum is sufficiently modest to
prevent customers from trading up to more expensive

“It remains a category where customers are loyal and it’s
an affordable indulgence,” said Swanson, who nonetheless has
concerns about the intense competition Hershey faces from
larger rival Mars-Wrigley, and higher commodity prices.

Hershey, named for its hometown in Pennsylvania,
significantly raised advertising spending during the quarter
and said it will continue to ramp up those efforts through the

On a conference call with analysts, Chief Executive David
West said that Hershey had gained market share during the first
part of the quarter and appeared to have continued that
momentum into the Easter holiday on April 4 as well.

Hershey plans to raise advertising spending by up to 40
percent this year to promote such products as Kisses, Kit Kat
and Twizzlers, rather than the 25 to 30 percent range it had
previously forecast.

Hershey generates about 85 percent of its sales in the
United States, which analysts have said puts it at a
disadvantage to rivals. For example, Nestle’s business in
emerging markets grew more than 10 percent.

While Hershey is controlled by a charity trust that would
make it difficult to take over, it could still be tempted to
make acquisitions and diversify beyond the United States.

“We wouldn’t be surprised to see that company look to
expand its geographic exposure, particularly in key emerging
markets,” Morningstar’s Swanson said.

At a conference in February, Hershey executives said they
saw opportunities for acquisitions overseas.

Stock Market News

(Reporting by Phil Wahba; additional reporting by Brad
Dorfman; Editing by Derek Caney and Matthew Lewis)

UPDATE 3-Hershey stock hits high on sweet sales, forecast