Hershey Co posted a higher-than-expected first-quarter profit on Tuesday, helped by price increases, and raised its full-year outlook, sending the candy maker's shares up more than 3 percent.
The maker of Reese's peanut butter cups, Twizzlers and Kit Kat bars said price increases were responsible for its 10.7 percent increase in first-quarter sales. Volume, which dipped slightly due to those increases, was still better than expected.
It is unusual for any food company, in our experience, to raise guidance this early in the fiscal year, and we interpret today's guidance raise as a particularly strong signal, said JP Morgan analyst Ken Goldman.
Hershey's strong results came a day after Kellogg Co cut its full-year outlook after a disappointing first quarter that was hurt by weakness in Western Europe and in some product categories in the United States.
Hershey, the world's largest chocolate maker, is often viewed as having more pricing power than some of its food industry peers, since chocolate often serves as an affordable luxury or indulgence.
The second quarter should see shipments of new products accelerate, with the roll out of Jolly Rancher Crunch 'N Chew and the launch of Rolo Minis and Ice Breakers Duos. The company is also launching Hershey's Simple Pleasures, with 30 percent less fat than the average chocolate.
Hershey now expects 2012 earnings of $3.11 per share to $3.17 per share, excluding one-time items, up from a prior forecast of $3.08 to $3.14 a share.
The company said it expects full-year net sales to rise 7 to 9 percent, up slightly from its prior estimate of a 6.5 to 8.5 percent increase.
For the first quarter, Hershey reported net profit of $198.7 million, or 87 cents per share, up from $160.1 million, or 70 cents per share, a year earlier.
Excluding items, earnings were 96 cents per share. On that basis, analysts on average were expecting 81 cents a share, according to Thomson Reuters I/B/E/S.
Net sales rose 10.7 percent to $1.73 billion, topping Wall Street estimates of $1.66 billion.
Hershey shares rose to $64.53 in premarket trading from Monday's close at $62.29 on the New York Stock Exchange.
(Reporting By Martinne Geller in New York; Editing by John Picinich)