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Midstate stock report: A few rising stars in 2014

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Stock prices rise and fall.

Some midstate stocks steadily rode the wave up over the last five years, while others fell significantly in 2009 and have been making their way back (see chart, page 6).

Where will the upside be in 2014?

Local investment advisers, who track many of the public companies on our list, weighed in.

Which stocks from midstate-based companies have the most potential for growth this year?

Hershey

For The Hershey Co., expect at least a continuation of a very good 2013, said Doug Thomas, principal at Lancaster-based Jet Investment Research Inc.

At the beginning of December, the adjusted closing price on Hershey stock was $96.49 per share, according to Yahoo Finance. The stock price grew more than 35 percent year over year.

"What's most impressive is they raised long-term guidance, which very few companies are doing at the moment," Thomas said.

In its third-quarter earnings report, Hershey increased its long-term target for annual earnings per share-diluted growth to 9 to 11 percent.

The Derry Township-based chocolate giant estimated that net sales would increase about 7 percent in 2013.

Thomas also touted Hershey's focus on its core brands, including increased marketing and the potential overseas, as major reasons to watch this stock.

"Chinese per capita consumption of chocolate is low. There is opportunity to penetrate those markets with innovative new products," he said.

Construction

As home construction and sales have picked up over the last two years, there is potential for improvement in nonresidential construction.

That could benefit a number of companies in Central Pennsylvania, including Wormleysburg-based Harsco Corp. and Manor Township-based Armstrong World Industries Inc., said Joseph Garner, director of research for Manheim Township-based Emerald Advisers Inc.

"Harsco would be for its exposure on the metals and materials side of the industry," he said. "As demand for steel turns, that's usually positive for the metal services side."

Harsco recently spun its infrastructure division into a joint venture with private investment firm Clayton, Dubilier & Rice for $300 million.

"Harsco is a show-me stock," Thomas said, citing the infrastructure move.

Armstrong, the maker of flooring, ceiling and other building products, also should benefit from stronger construction demand, Garner said.

In addition, Lancaster-based Burnham Holdings Inc. "absolutely" could see its stock rise, he said. Burnham is the parent company of 14 subsidiaries that make boilers and heating, ventilation and air-conditioning equipment.

Glatfelter, Bon-Ton, Dentsply

A trio of York County stocks could be strong performers in 2014.

York-based P.H. Glatfelter Co., the specialty paper maker that does business as Glatfelter, has been on a nice growth trajectory by dealing in key markets such as tea, single-serve coffee and feminine hygiene products, Garner said.

"They are shifting to higher-growth, higher-margin types," he said.

Springettsbury Township-based Bon-Ton Stores Inc. has done a good job of managing inventories tightly and controlling expenses.

Increased consumer demand in 2014 should help the retail chain, Garner said.

"If they are doing the right things behind the scenes, that will put them in a position once the consumer is there," he said.

York-based Dentsply International Inc. could see upward growth with a rise in discretionary dental procedures. The dental products manufacturer has had "relatively consistent" business growth in recent years, according to Emerald.

Hersha

Harrisburg-based Hersha Hospitality Trust's stock could produce steady returns for investors following the real estate investment trust's recently completed portfolio transformation, said Steven Russell, Emerald's senior research analyst.

In September, Hersha sold off 16 remaining noncore hotel properties to give it more flexibility to invest in major market projects.

Its focus now is solely on select-service hotels in urban gateway markets with high barriers to entry.

"You are going to see benefits hit the bottom line," Russell said.

The banks

Slow growth could be the name of the game in local banking stocks, Russell said.

Lititz-based Susquehanna Bancshares Inc. and Lancaster-based Fulton Financial Corp. might be the two to watch, he said.

"The challenge for Fulton and Susquehanna, because they are so large, is that it's tough to grow in any significant way," he said. "I do think they will grow, but at a slower rate than some of their smaller peers."

Thomas cited the lack of consolidation in the industry.

"That's the key at some point for the bank stocks," he said. "That would be a catalyst for higher stock prices."

Susquehanna has maybe been the most consistent and they have put together some pretty attractive acquisitions, including Tower Bancorp Inc. in the beginning of 2012, Russell said.

"They have benefited the most from weakness in the market," he said.

Challenging

Lower Allen Township-based Select Medical Holdings Corp.'s stock returns may continue to be a challenge, Garner said.

"There is a lot of concern about where reimbursement is going and where we stand on long-term acute care services," he said. "It's a tight budget environment in Washington. Reimbursements for that category are always going to be under scrutiny."

Regulatory uncertainty is another challenge, he said.

Click here to download "More to the story: A look at revenue and net income (loss), in dollars."

Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at jasons@cpbj.com. Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

Mike Sadowski covers Lebanon County, banking and finance, law and the legal community, and technology. Have a tip or question for him? Email him at michaels@cpbj.com. Follow him on Twitter, @MikeCPBJ. Circle on .

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