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Hershey Beat Leaves Bad Taste in Analysts’ Mouths

Hershey was the unlikely earnings winner of the day after blowout sales pushed the stock higher more than 6 percent, leaving a bad taste in the mouths of analysts, who overwhelmingly hate the shares.

The ‘Kisses’ and ‘Almond Joy’-maker posted first quarter sales of $1.41 billion, above the $1.29 billion consensus analyst estimate from Thomson Reuters. The company also increased its 2010 sales forecast to at least 6 percent, more than its initial estimate of 3 to 5 percent.

“Hershey’s first quarter results were strong against all key metrics, as our core brand momentum continued to build in the marketplace,” said David West, Hershey’s Chief Executive, in a press release. West cited increased advertising for gains in U.S. market share.

Analysts have been negative on Hershey since it was outbid by Kraft for Cadbury earlier this year, raising concerns about the company’s ability to increase its global market share. Eleven analysts rate the stock a ‘hold’ or ‘sell’ and only one says it’s a “strong buy.”

“Hershey continues to support its brands with 25 to 30 percent higher ad spending in 2010,” wrote BMO Capital Markets analyst Kenneth Zaslow in a note to clients this morning. But, “its long-term growth may be structurally constrained by not acquiring Cadbury.” Zaslow rates Hershey a ‘market perform’.

But the 117-year old company headquartered in the Pennsylvania town that bears its name continues to bank on reinventing itself to grow sales in the U.S. market. Hershey launched a number of new products in December, such as ‘Hershey’s Special Dark’ and ‘Pieces’ lines for ‘Almond Joy’ and ‘York’. The stock is up 33 percent this year.


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