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Hershey Falls on Downgrade

Reuters
Friday, 1 Dec 2006 | 11:19 AM ET

Prudential Equity cut its rating on candy maker Hershey to "underweight" from "neutral weight" on Friday, saying a salmonella issue in Canada could hurt the company's fourth-quarter trends.


On Nov. 12, the Canadian Food Inspection Agency announced a recall of certain products made by Hershey Canada because they may have been contaminated with salmonella bacteria, which can cause serious and sometimes fatal infections in young children, frail or elderly people, and others with weakened immune systems.


A Hershey spokesman had no immediate comment on the downgrade.


In October, Hershey reported third-quarter profit and sales that were below analysts' estimates as the company lost market share to Mars.


Prudential analyst John McMillin said third-quarter net revenue was hurt by returns from retailers and that the problem might linger.


"Obviously, what matters most are current and future trends, and we have lost a little confidence," McMillin wrote.


Hershey shares are down 2% since the third quarter earnings report, compared with a 2.6%increase for the Standard & Poor's Packaged Foods index.

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