Making Easter Sweeter: Chocolate on the Rise

Bags of jellybeans lining the grocery store aisles can only signify one thing: Easter is a comin'. And while the springtime equivalent to Halloween boasts brightly colored eggs and lots of gelatinous candy, the signature confection of the holiday tends to be chocolate. From large bunnies waiting nervously in hidden baskets to foil-wrapped eggs laid in artificial grass, chocolate arguably dominates any given candy supply throughout the month of April. The Hershey Company HSY, well-known for dark, milk and white chocolate goodness, recently sat down with Bank of America analysts and reaffirmed their favorable view of the U.S. confections market and the candy-maker as a whole. As the big-time company gears up for Easter madness, it announced to Bank of America that it will serve up new additions to the Hershey family at a later time this year. From the discussion, Bank of America had the following takeaways, “1) There were a number of questions about the competitive environment and the prospects for increased promotions in chocolate in 2012. Management indicated that there was not a lot of evidence of this; 2) HSY new product introductions in 2012 are scheduled to hit a little later relative to 2011 in part because HSY didn't want new products to compete with Easter. Mars is introducing new items in 1Q12, thus HSY could see an adverse effect on market share in the near term.” As Hershey makes the conscious decision to step out of the introductory spotlight, Kraft Foods KFT rolls into a transitional phase. The Cadbury egg distributor has plans for expansion in the Middle East and recently filed its Form 10 for a company spin-off. Analysts are seeing Kraft in a fairly good light following the Form 10 filing, as J.P. Morgan raised its PT from $39 to $44. “Our bias toward the stock is constructive, as we appreciate Kraft's recent ability to drive both organic volumes and pricing, and our revised earnings estimates for next year are above the Street's. We also think that GroceryCo CEO Tony Vernon has proven to be a talented marketer and we admire Kraft's strong distribution in emerging markets,” J.P. Morgan said in the report. Back in March, Kraft's stock was already seeing earnings improvement following its $19.6B Cadbury acquisition, and there is no doubt that this will continue coupled with the aforementioned good news. “Kraft Foods‘Cadbury acquisition is starting to yield results as the company is able to leverage the high brand recognition of its products with Cadbury's existing distribution and supply chain networks in developing markets. Kraft reported a 54% jump in full year earnings on February 21,” Trefis reported last month. For what is sure to be a scrumdiddlyumptious Sunday, it appears there will be no shortage of chocolate sweets to hop around this year come April 8th. Hershey is currently trading at $61.13, up +12.58%. Kraft is currently trading at $38.33, up +21.29% YoY.