Analyst Insight: Morgan Stanley Raised Its Q1 EPS Estimate For The Hershey Company

Morgan Stanley analysts are raising their Q1 EPS estimate to $0.44, up from $0.43, for The Hershey Company (NYSE:HSY) on stronger-than-anticipated measured channel sales data.

Analysts Vincent Andrews and Jaclyn Inglesby said, "While Hershey's key commodity inputs were sharply higher year-over-year on a spot basis (~36%, ~20~, and ~93%, respectively), we believe that Hershey has favorable cocoa and sugar hedges in place. For 1Q10, our $0.44 estimate is comprised of: 1) Net sales growth of 6.3% (includes a 1% benefit from FX); 2) A 36.9% gross margin, 100 bps points of expansion year-over-year; 3) A 13.9% operating margin, flat YoY, as gross margin upside is reinvested into incremental advertising spend; and 4) $24 mn in interest expense and a 36% tax rate, both per management guidance."

Morgan Stanley maintains its equal-weight rating on the stock. The bank sees fiscal 2010 EPS of $2.32 and fiscal 2011 EPS of $2.52.

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