HSY: Something to nibble on - Upgrading to Outperform based on improving volume and share trends
Alexia Howard
We are upgrading Hershey from Market-Perform to Outperform with a target price of $235 based on: 1) Improving market share and volume trends as innovation picks up and we lap last year’s Mars candy recall. Trends have improved meaningfully in recent months since the launch of Reese’s caramels.

2) Continued strong top line growth due to cocoa and sugar-driven price increases, with cocoa spot prices up ~80% over the past year, we believe that the company will have ample ammunition to push through additional pricing this year to strengthen the top line relative to other U.S. food peers.

3) The potential for decent gross margin performance in 2024 based on pricing vs. the timing of cocoa hedges, which we believe typically average ~2 years in duration, although there may be somewhat less visibility in 2024 due to weak volume performance last year.