12:29 PM EST, 11/05/2024 (MT Newswires) -- Hershey's (HSY) Q3 results are expected to "slightly underperform" expectations due to shipment and consumption trend challenges, RBC Capital Markets said in a note Tuesday.

Analysts, including Nik Modi, said that feedback on Halloween sales suggests weaker growth compared to last year. Looking ahead to 2025, the company faces a tough choice between raising prices to cover rising cocoa costs, which could risk losing customers or absorbing the costs to maintain long-term stability in the category.

Sentiment around Hershey is low due to cocoa price volatility, a pressured consumer base, and ongoing weakness in convenience stores. This has led to higher short interest, and concerns about 2025 earnings, especially with upcoming price hikes. The impact on consumer demand and potential loss of customers remains uncertain, the analysts said.

"At the total company level, we think that consensus and our expectations for organic growth may be a tad too high and thus are conservative into the print," the analysts added.

Hershey was one of the top performers in packaged food during the pandemic but faces significant cost inflation and a pressured consumer in the near term, RBC said. While Salty Snacks was a growth driver, share gains have slowed, especially in the ready-to-eat popcorn category, the analysts said, adding that they believe management can navigate these challenges through adjustments in marketing and innovation.

RBC maintained a Sector Perform rating on the stock with a $205 price target.

Hershey is set to release its Q3 results on Thursday.

Price: 178.99, Change: -0.01, Percent Change: -0.01