12:18 PM EDT, 10/07/2024 (MT Newswires) -- Hershey (HSY) is likely to face continued input cost pressures and a "challenging" demand environment in 2025, UBS Securities said in a note e-mailed Monday.

The brokerage expects the company's 2025 earnings to be down 7% year-over-year to $8.80 per share, which it said is 5% below Visible Alpha consensus.

"The primary driver of our downgrade centers on a view that Street estimates for 2025 look particularly optimistic given continued input cost pressures (namely cocoa), coupled with a demand backdrop that remains uncertain/challenging," UBS analysts, including Peter Grom, said in a note to clients.

"Until visibility improves on the top- and bottom-line trajectory over the next 12-18 months, we move to the sidelines and expect shares to remain largely range bound," the analysts said.

UBS said it does not see a return to earnings per share growth for the company until 2026, adding that the firm's internal revenue growth model, ability to set prices, and emphasis on cost reduction will enable it to achieve a 6-8% adjusted EPS growth longer term.

The current inflationary phase for Hershey is expected to constrain the firm's capacity to meet its growth projections beyond 2025, potentially leading to a consecutive year of EPS decreases, according to the note.

UBS downgraded its rating on the Hershey stock to neutral from buy and lowered its price target to $209 from $226.

Hershey shares were down nearly 2% in recent trading.

Price: 188.07, Change: -3.77, Percent Change: -1.97