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Hershey upbeat as cost inflation eases

Hershey Co. on Thursday reported a third-quarter profit that was slightly ahead of analysts’ expectations.

Elise Amendola/AP

Hershey Co. gave an upbeat outlook on Thursday despite expectations that the economy will remain weak, as it benefited from productivity improvements and commodity cost inflation that should be more moderate than expected.

The maker of Kit Kat, Twizzlers and Reese's peanut butter cups raised its forecast for 2012 and said earnings in 2013 would be in line with its long-term targets.

The company also reported a third-quarter profit that was slightly ahead of analysts' expectations and said Halloween candy sales were off to a good start.

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The candy maker said third-quarter net income was $176.7-million (U.S.), or 77 cents per share, down from $196.7-million, or 86 cents per share, a year earlier.

Excluding one-time charges, pension expenses and other items, earnings were 87 cents per share. On that basis, analysts on average were expecting 86 cents, according to Thomson Reuters I/B/E/S.

Sales rose to $1.75-billion from $1.62-billion.

Hershey said it now expected full-year 2012 earnings of $3.22 to $3.25 per share before items, an increase of 14 per cent to 15 per cent from 2011. Its prior forecast called for a rise of 12 per cent to 14 per cent, and analysts were expecting a profit of $3.23 per share.

For 2013, the company expects earnings of $3.37 to $3.49 a share, including charges and costs of 9 cents to 11 cents.

That would represent growth of 8 per cent to 10 per cent, which JPMorgan Chase & Co. analyst Ken Goldman said seemed conservative.

The company said commodity costs would be higher in 2012 than last year, but that the increase would not be as much as expected. As a result, adjusted gross margin should increase 120 to 140 basis points, which is greater than its previous forecast of 100 to 120 basis points.

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Hershey also said its recent acquisition of Brookside Foods would add slightly to earnings for the year.

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