HSY: Advertising Surge To Support Improving Sales

Analysts at Citigroup reiterate their "buy" rating on Hershey Foods Corp HSY. The target price for HSY is set to $55. According to Citigroup, the overall tone of the management was very positive during the meeting, with “HSY indicating that baseline volumes at the company were very healthy and growing faster than promoted volumes for the first time in recent memory.” The analysts say, “We believe HSY’s sales and market share trends should remain firm given the planned 40% increase in advertising for 2010, which comes on top of last year’s 50% increase.” “Importantly, a significant portion of Hershey’s new product innovation is set for launch in the fourth quarter led by Reese’s Minis and Hershey Drops, meaning that new products launched at the end of 2010 should continue to bolster volumes in 2011,” Citigroup adds. “While Hershey has fully lapped last year’s price increases, there remains the possibility for Hershey to realize improved pricing from mix improvements over the remainder of 2010 as Hershey’s high margin loose bar business is currently performing well. HSY maintains a healthy balance sheet and produces strong cash from operations. Management indicated that “bolt-on” acquisitions remain a possibility with further room for dividend increases and potential share repurchase activity. We believe that Cadbury’s Poland operation which is up for sale could be an attractive target for Hershey,” the analysts mention. More Analyst Ratings here