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Hershey Offers Healthier Chocolate

Zacks Equity Research

The Hershey Company (HSY) launched a new product, Hershey’s Simple Pleasures, which contains 30% less fat compared to other leading milk chocolates. This is the company's first new launch in five years.

The company is innovating new higher-quality products in order to ensure stable growth. The company realizes that customers are health conscious and aware of portion control. In fact, there is a large population who love chocolates but refrain in order to maintain a healthy lifestyle. These customers are the potential clientele for Simple Pleasures.

This low fat chocolate is expected to widen the company’s customer base and increase its net sales in the upcoming quarters of 2012, thus helping the company achieve its fiscal target.

For 2012, the company expects adjusted earnings to be in the range of $3.11–$3.17 per share. The adjusted earnings per share are expected to grow in the range of 10–12% year over year compared to previous expectations of 9–11%. The Zacks Consensus Estimate is 61 cents for the second quarter of 2012, and $3.21 for FY2012.

We appreciate the company’s investment in brand building and product innovation, which eventually should result in consistent growth over the long term. However, on the flip side, increasing advertising expenses and rising cost of input commodities -- particularly cocoa, milk and fuel -- can have a negative impact on margins of the company. 

The Hershey Company carries a Zacks #2 Rank in the near term (Buy rating).

Based in Hershey, Pennsylvania, The Hershey Company is the largest producer of chocolates in North America. The company offers more than 25 brands including Hershey's, Hershey's Kisses, Hershey's Bliss, Hershey's Special Dark and Kit Kat.

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