4 Reasons To Own Hershey Shares Right Now

After more than two years of missing expectations due to disappointing results and after rejecting a take-out offer from Mondelez International Inc MDLZ, Hershey Co’s HSY management is under a fair degree of pressure this year to prove to the market that it can "achieve above-peer returns as an independent company,” Credit Suisse’s Robert Moskow stated in a report.

Moskow upgraded the rating on Hershey from Neutral to Outperform, while raising the price target from $106 to $117.

Reasons To Own The Stock

The analyst expects positive earnings revisions to be driven over the next 12 months by a robust finish to 2016, which in turn is likely to be due to the meaningful flexibility in guidance and the strong seasonal confectionery sales in the US.

The earnings upside is also likely to be due to further right sizing of overhead costs, especially in China in order to adjust to a more realistic growth outlook, as well as from “a dramatic downturn in cocoa commodity costs that bodes well for 2018.”

Moskow also expects above peer sales growth for Hershey, driven by a longer Easter selling season and “more resonant product innovation” in the US.

The analyst expects Hershey’s investor day on March 1 to also prove to be a positive catalyst, since it would provide the new CEO, Michelle Buck, an opportunity to offer greater clarity regarding the company’s plans to drive a rebound.