Hershey Cuts Long-Term Earnings Growth Outlook

Hershey cut its long-term earnings growth target on Tuesday and said it would boost advertising by at least 20 percent in each of the next two years as it tries to turn around sluggish sales and falling profits.

But the largest U.S. chocolate company stood by its 2008 earnings forecast, which is above analysts' average estimate.

Hershey , which is meeting with financial analysts in New York on Tuesday, set a long-term annual earnings per share growth goal of 6 percent to 8 percent, down from a previous target of 9 percent to 11 percent.

It set an annual sales growth goal of 3 percent to 5 percent, compared with 3 percent to 4 percent previously.

In October Chief Executive David West said the previous goals would be reviewed to see if they were still attainable, and many analysts had expected the earnings target to be cut.

Hershey has faced soaring prices for energy and ingredients like cocoa, while also losing market share to rival Mars, the maker of M&Ms.

Hershey stood by its 2008 earnings forecast of $1.85 to $1.90 a share before one-time items. Analysts' average forecast is $1.82, according to Reuters Estimates.

In April Mars agreed to buy Wm Wrigley Jr  for $23 billion, a move that will make it the world's largest candy maker. The deal prompted speculation about consolidation in the global candy industry, with Hershey seen as a possible target.

But the Hershey Trust, which controls almost 80 percent of Hershey's voting stock, has said it is required by Pennsylvania law to maintain voting control over Hershey, which would seem to preclude an outright acquisition of the company.

Analysts have said Hershey could enter a joint venture with another candy maker, such as Switzerland's Nestle, to help increase its international distribution.

Copyright 2008 Reuters. Click for restrictions.