Hershey (HSY) is positioned for outperformance with more clarity on revenue growth and a recovery in profit margins, Morgan Stanley said in a Thursday note.

The company delivered strong Q4 results that featured 5.7% organic sales growth and full-year 2026 EPS guidance that is "well above" analysts' consensus, Morgan Stanley analysts said. Improving fundamentals in the industry, a strong lineup of innovations, and a better cost backdrop point to sustained inflection in its earnings, the analysts said.

Cocoa prices have dropped 30% year-to-date, which greatly enhances predictability for profit margin expansion in 2027, even if Hershey's investment levels stay somewhat high, the analysts said. Price deflation concerns appear exaggerated due to the significant differences in the US and European markets, such as market structure, brand concentration, and retailer dynamics, the analysts added.

Hershey has risen above its peers in the food industry with stronger organic sales growth performance and a clearer path to earnings recovery, according to the note.

Morgan Stanley reiterated the company's stock at overweight and raised the price target to $238 from $214.

Price: 230.69, Change: +6.26, Percent Change: +2.79