Today, Hershey (HSY) reported a 30% rise in third-quarter profits over a year ago. The good news for the chocolate and confections-maker is that it earned $162 million, or 73 cents a share (on an adjusted basis), during the prior three months.  The Street was betting the candy bar maker would bake up a profit of just 67 cents per share.  

The bad news is while Hershey did beat its bottom-line earnings estimates, it fell short of expectations on the top-line revenue number.  Sales for the quarter were $1.48 billion, below the $1.53 billion in sales for the quarter analysts estimated, making this quarter bittersweet for Hershey.

Bittersweet, too, is the stock’s technical picture.  As we can see here by the chart of HSY, shares have made a remarkable run higher since breaking through both the short-term, 50-day moving average (blue line), and the long-term, 200-day moving average (red line) back in mid-June.  However, today’s news sent HSY shares down below their 50-day average, a clear sign that support at the $39 level was shaky at best.

Hershey has great brand awareness, ranking No. 1 in the world by research firm Corebrand in terms of how the brand contributes to the market value of the company. The company also has benefited from a weak U.S. dollar, as so many international firms have over the past year.  

But the company faces rising commodity costs. Even efforts to save money by replacing the cocoa butter in some of Hershey’s chocolate products with vegetable oil hasn’t helped. Hershey was recently forced to raise its prices to offset rising commodity costs.

With the mixed bag of positives and negatives here, and with the sellers taking control of the stock in response to today’s bittersweet earnings, I think Hershey is one stock you want to pass on for now.

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