Hershey Q3 Profit Rises - Update

(RTTNews) - Thursday, chocolate and confectionery products maker Hershey Co. (HSY | Quote | Chart | News | PowerRating) posted an increase in third-quarter profit, led by core brand growth, solid performance within key retail channels and strong productivity gains. On a per share basis, adjusted earnings rose 14.1% from last year and topped the Street view.

The Hershey, Pennsylvania-based company reported third-quarter net income of $162.0 million or $0.71 per share, compared to $124.5 million or $0.54 per share in the year-ago quarter.

The company noted that results for the third quarters of 2009 and 2008 include net pre-tax charges of $11.0 million or $0.02 per share and $31.0 million or $0.10 per share, respectively. These charges are associated with the Global Supply Chain Transformation or GSCT program. Total GSCT program costs to date totaled $602.7 million.

On an adjusted basis, net income increased to $168.5 million or $0.73 per share from $145.8 million or $0.64 per share in the same quarter of last year.

On average, 14 analysts polled by Thomson Reuters expected the company to post earnings of $0.67 per share. Analysts' estimates typically exclude special items.

Quarterly net sales totaled $1.48 billion, down from the previous year's $1.49 billion, and fell shy of the $1.54 billion revenue consensus estimate of ten Wall Street analysts.

David West, President and Chief Executive Officer of Hershey, said, "Increased levels of in-store programming and merchandising, as well as outstanding execution at the retail level, continue to drive our positive marketplace results in the food, convenience and mass classes of trade. We'll continue to invest in our brands and business capabilities and anticipate a solid finish to the year."

U.S. retail takeaway for the 12-weeks ended October 3, 2009, in channels that account for over 80% of its U.S. retail business, was up 4.8%.

For the nine-month period, the company reported net income of $309.2 million or $1.35 per share, compared to $229.3 million or $1.00 per share in the prior-year period. Adjusted net income totaled $352.5 million or $1.54 per share, compared to $296.7 million or $1.30 per share in the nine months ended September 28, 2008.

Year-to-date net sales advanced to $3.89 billion from $3.76 billion reported in the comparable period of the previous year.

Looking forward to the fourth quarter, Hershey said gains from pricing will not be as significant, as the Holiday season is smaller than Halloween. Further, the company expects shipments of Valentine's and Easter seasonal product to be lower in the fourth quarter of 2009 versus 2008.

For fiscal 2009, GAAP earnings are expected to range between $1.80 and $1.88 per share, including possible non-cash pension settlement charges, of about $0.26 to $0.32 per share. The forecast for total charges related to the GSCT program remains at $640 million - $665 million.

Hershey now projects adjusted earnings in the range of $2.12 - $2.14 per share, as it is accelerating domestic and international investments in consumer capabilities, customer insights and category management techniques that would benefit the company over the long term. Earlier, the company had expected the increase in adjusted earnings per share for the full year to be slightly above its long-term objective of 6% - 8%. Fifteen Wall Street analysts have a consensus earnings estimate of $2.08 per share for fiscal 2009.

Moreover, the company assumes that the economic environment for consumers in the U.S. and international markets will continue to be challenging in 2010. Hershey added that it would continue to focus on and make appropriate investments in its core brands and expects 2010 net sales growth to be within 3% - 5% long-term objective. The sell through at retail for Halloween would be greatly affected by the remaining days in the season and would determine the company's approach to the upcoming Holiday, Valentine's and Easter seasons, all of which it expect will be at the higher seasonal promoted price points.

For 2010, Hershey, which also makes food and beverage enhancers, said it expects growth in adjusted earnings per share to be within its long-term objective of 6% - 8%.

Hershey shares, which have been trading between $30.27 and $42.25 in the past 52 weeks, closed Wednesday's trading session at $40.67.

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