Hershey (HSY) - Get The Hershey Company Report shares were initiated buy at Citi with a $172 price target, as analyst Wendy Nicholson sees "some sequential improvement" in third-quarter revenue compared with the first half.
The analyst moved "[despite] what could be weak sales leading up to the Halloween holiday, and a subdued outlook for the fourth quarter," she said.
Hershey in the first half reported a 1% drop in sales and a 1% increase in earnings per share. That's weaker than its U.S. packaged-food peers, Nicholson said.
This led Hershey stock to underperform the S&P 500 year to date, up 2% relative to the market, which is up 8%.
Hershey shares at last check were off 0.4% to $149.40. The shares are 7.4% lower than their 52-week high near $162, set in mid-February.
The iconic Hershey, Pa., candy maker is scheduled to report third-quarter results on Nov. 6. Analysts surveyed by FactSet are expecting earnings of $1.71 a share on revenue of $2.14 billion.
Earlier this year, Hershey reported second-quarter earnings that topped estimates, though sales for the quarter fell short. The company also raised its dividend and offered strong guidance for the second half.
"More importantly, as we turn the corner into 2021, we expect HSY to benefit not only from easier year-over-year comparisons related to its international and convenience businesses, but also from a return to more robust innovation and marketing," Nicholson said.
"This should help the company get back to its long-term growth algorithm (2% to 4% sales growth, 6% to 8% earnings-per-share growth) next year."