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Hershey shares drop after firm announces price hike
Shares of The Hershey Co. dropped sharply this morning as investors reacted to an update from the company
and a downgrade by an analyst.
Hershey on Friday afternoon announced a price increase amounting
to 10 percent across its domestic product line. The company also reported that
2008 earnings would probably be on the lower side of its guidance of $1.85 to
$1.90 per diluted share. Hershey also slashed its expectations of 2009 sales
growth to between 2 and 3 percent, down from between 3 and 5 percent.
Hershey shares were off about 10 percent, to $37.45, shortly
before noon.
Citigroup analyst David Driscoll today issued a note
downgrading the company’s stock from “buy” to “hold.” A recent run-up in
Hershey’s stock has brought it within Driscoll’s target of $42, he wrote.
“We
believe that Hershey still has issues that need fixing and see the stock price
as reflecting the good news that came out of the (second quarter) earnings
report,” he wrote.
Both
Driscoll and Wachovia Corp. wrote today that the price increase was a good
move. But the lower guidance was a disappointment, according to a Wachovia
stock market update.
“We
continue to think the disappointments are a product of under-investment, less
so than the cited commodity costs or consumer environment,” Wachovia wrote.
Hershey
said it will stick with recently announced increases to its marketing budget.
The
company’s shares are traded on the New York Stock Exchange under the ticker
symbol HSY.
