Investing.com -- Citi upgraded Hershey Co (NYSE:HSY) to "Neutral" given a more balanced risk-reward profile following the company’s 2025 earnings guidance but lowered its price target to $154 from $159, adjusting for persistently high cocoa prices and a cautious pricing strategy.
Hershey shares have fallen 24% over the past six months, among the worst in Citi’s coverage. While the stock still trades above 25 times 2024 earnings, Citi believes the company’s earnings base is now reset, providing a foundation for potential growth in 2026. The bank trimmed its 2025 and 2026 EPS estimates to $6.15 and $6.77, respectively, reflecting elevated cocoa costs.
Citi highlighted potential upside drivers, including lower-than-expected price elasticity, additional pricing actions, and a possible retreat in cocoa prices. Hershey has refrained from increasing prices on single-serve products, a move aimed at improving market share and merchandising. However, with cocoa prices now projected to remain above $7,500 per metric ton in 2026, further pricing adjustments may be necessary.
Despite near-term challenges, Citi sees room for earnings upside if input costs ease or the company takes broader pricing actions.