Hershey's Earnings and Guidance Disappoint

Hershey Co. reported Thursday its third-quarter profits dropped 66% because of higher expenses and stiffer competition. The U.S.'s largest candy maker said it earned $62.8 million ($0.27/share) compared to $185 million ($0.78/share) last year. Excluding certain costs, the company earned $0.68/share, short of analyst forecasts of $0.71/share. Sales unexpectedly fell 1% to $1.42 billion after Mars Inc. stole market share; analysts expected sales of $1.44 billion. "They are losing market share in a shrinking market, which is the worst of all worlds," said Walter Todd of Greenwood Capital. For the year, Hershey expects to earn $2.08-$2.12/share, well below analysts' projections of $2.24/share. CEO Rick Lenny blamed the higher costs of ingredients like nonfat dry milk, whose prices are twice what they were last year, and poor performance of limited edition products(full transcript later today). The company plans to increase its sales force by 30% to spur faster sales growth. Hershey's shares traded down 2.8% to $43.05 Thursday.

Sources: Press release, Reuters, Bloomberg
Commentary: Hershey's Trust Sours on Chocolate Maker • Hershey CEO Kisses Company Goodbye
Stocks to watch: HSY.Competitors: CSG, WWY. ETFs: RHS

Earnings call transcript: Hershey Co. Q2 2007

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