Pro Analysis

Hershey shares to rally on lower cocoa prices, other cost savings, analyst says

Hershey's
Getty Images

Credit Suisse on Friday upgraded Hershey to outperform from neutral, citing the potential for the candy maker to significantly reduce expenses and prove it was right to deny a takeover attempt last year and go it alone.

"After more than two years of missing expectations due to disappointing results and after rejecting a takeout offer from Mondelez, Hershey's management is under a fair degree of pressure this year to prove to the market that it can achieve above-peer returns as an independent company. We believe that it is set up to do exactly that over the next 12 months," equity analyst Robert Moskow wrote in a note to clients.

Strong confectionery sales in the U.S. last year, falling cocoa prices and a "more realistic outlook for growth," could mean the Street revises Hershey's earnings estimates higher in the upcoming quarters, Moskow said.