Hershey profit beats estimates on US demand

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Hershey Co (HSY.N), the maker of Hershey's Kisses and Reese's Peanut Butter Cups, posted a higher-than-expected quarterly profit as demand strengthened in the United States and the company spent less on advertising and marketing.

Hershey's shares rose almost 7 percent to $101.91 on Friday morning, their biggest intraday percentage gain since June, when Mondelez's offer to buy the company became public.

Hershey's North America sales, which account for about 85 percent of total sales, rose 1.8 percent to $1.76 billion in the third quarter ended Oct. 2.

Consumers are visiting stores more frequently and are "beginning to spend a little bit more confidently than before," Chief Executive John Bilbrey said on a conference call.

Hershey is introducing new products to overcome weak demand in North America due to changing consumer tastes and growing competition.

The launch of Reese's Pieces Cups, which combine the Peanut Butter Cups with Reese's Pieces, increased sales of the brand by about 8 percent in the quarter, Bilbrey said.

Hershey also plans to launch Cookie Layer Crunch, a chocolate bar with layers of cookie bits, during the holidays and said it has "good visibility" into product's holiday sales.

See the most popular halloween candy in each state:

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Most popular Halloween candy in each state
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Most popular Halloween candy in each state

Alabama: Airheads

Photo: Amazon

Source: Influenster

Alaska: Snickers

Photo: Shutterstock

Source: Influenster

Arizona: Toblerone

Photo: Ben Gabbe via Getty Images

Source: Influenster

Arkansas: Skittles

Photo: Cassandra Hubbart, AOL

Source: Influenster

California: Lifesavers

Photo: Tim Boyle via Getty Images

Source: Influenster

Colorado: Milky Way

Photo: Cassandra Hubbart, AOL

Source: Influenster

Connecticut: Reese's Peanut Butter Cups

Photo: The Washington Post via Getty Images

Source: Influenster

Delaware: 3 Musketeers

Photo: Myra Iqbal, AOL

Source: Influenster

Florida: Nestlé Crunch Bar

Photo: AP

Source: Influenster

Georgia: Pixy Stix

Photo: Jennifer Smith via Getty Images

Source: Influenster

Hawaii: 100 Grand Bar

Photo: Amazon

Source: Influenster

Idaho: Butterfinger

Photo: Mark Lennihan/AP

Source: Influenster

Illinois: Snickers

Photo: Shutterstock

Source: Influenster

Indiana: Reese's Pieces

Photo: Amazon

Source: Influenster

Iowa: Twix

Photo: ullstein bild via Getty Images

Source: Influenster

Kansas: Twizzlers

Photo: The Washington Post via Getty Images

Source: Influenster

Kentucky: Whoppers

Photo: Amazon

Source: Influenster

Louisiana: Swedish Fish

Photo: FoodPhotography Eising via Getty Images

Source: Influenster

Maine: Starburst

Photo: Amazon

Source: Influenster

Maryland: Almond Joy

Photo: The Washington Post via Getty Images

Source: Influenster

MassachusettsStarburst

Photo: Amazon

Source: Influenster

Michigan: M&M's

Photo: elevenmoments via Getty Images

Source: Influenster

Minnesota: 100 Grand Bar

Photo: Amazon

Source: Influenster

Mississippi: Hershey's Kisses

Photo: Steven Mark Needham via Getty Images

Source: Influenster

Missouri: Hershey's Kisses

Photo: Steven Mark Needham via Getty Images

Source: Influenster

Montana: Kit Kat Bar

Photo: Newscast via Getty Images

Source: Influenster

Nebraska: Skittles

Photo: Cassandra Hubbart, AOL

Source: Influenster

Nevada: Jolly Ranchers

Photo: Amazon

Source: Influenster

New Hampshire: Tootsie Rolls

Photo: Victor Spinelli via Getty Images

Source: Influenster

New Jersey: Sour Patch Kids

Photo: Mat Hayward via Getty Images

Source: Influenster

New Mexico: 3 Musketeers

Photo: Myra Iqbal, AOL

Source: Influenster

New York: Sweet Tarts

Photo: Amazon

Source: Influenster

North Carolina: Butterfinger

Photo: Mark Lennihan/AP

Source: Influenster

North Dakota: Sour Patch Kids

Photo: Mat Hayward via Getty Images

Source: Influenster

Ohio: Milky Way

Photo: Cassandra Hubbart, AOL

Source: Influenster

Oklahoma: M&M's

Photo: elevenmoments via Getty Images

Source: Influenster

Oregon: Candy corn

Photo: Garry Gay via Getty Images

Source: Influenster

Pennsylvania : Swedish Fish

Photo: FoodPhotography Eising via Getty Images

Source: Influenster

Rhode Island: Reese's Peanut Butter Cups

Photo: The Washington Post via Getty Images

Source: Influenster

South Carolina: Candy corn

Photo: Garry Gay via Getty Images

Source: Influenster

South Dakota: Laffy Taffy

Photo: Justin Sullivan via Getty Images

Source: Influenster

Tennessee: Candy corn

Photo: Garry Gay via Getty Images

Source: Influenster

Texas: Candy corn

Photo: Garry Gay via Getty Images

Source: Influenster

Utah: Nerds

Photo: Amazon

Source: Influenster

Vermont: Almond Joy

Photo: The Washington Post via Getty Images

Source: Influenster

Virginia: Reese's Pieces

Photo: Amazon

Source: Influenster

Washington: AirHeads

Photo: Amazon

Source: Influenster

West Virginia: Oreos

Photo: bhofack2 via Getty Images

Source: Influenster

Wisconsin: Laffy Taffy

Photo: Justin Sullivan via Getty Images

Source: Influenster

Wyoming: Candy corn

Photo: Garry Gay via Getty Images

Source: Influenster

District of Columbia: Twix

Photo: ullstein bild via Getty Images

Source: Influenster

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"While sales growth has been weak for the business, any improvement in category growth rates in the U.S. in particular, but also in China, could move shares higher," Stifel analyst Christopher Growe wrote in a note, referring to his $94 price target.

Hershey, since rejecting the $23 billion offer from Mondelez International Inc (MDLZ.O), is working to cut costs by consolidating its supply chain and some factories in China and North America, and spending less on advertising.

The company said it expects 2016 capital expenditure at the lower end of its reduced range of $265 million-$275 million.

Hershey is set to undergo a management overhaul, with Bilbrey retiring next year. The charitable trust which controls the company reached a major reform agreement with its overseer, the Pennsylvania attorney general's office, following a months-long investigation.

The company's net income rose 47 percent to $227.4 million, or $1.06 per share, in the quarter, helped by lower costs.

Excluding items, Hershey earned $1.29 per share, beating the average analyst estimate of $1.18 per share, according to Thomson Reuters I/B/E/S.

Net sales rose 2.2 percent to $2 billion, in line with analysts' average estimate.

Hershey raised its 2016 adjusted earnings forecast to $4.28-$4.32 per share from $4.24-$4.28, citing cost savings and a slightly more favorable tax rate than expected.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Martina D'Couto)

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