March 26 - Credit Suisse downgraded chocolate maker Hershey Co and the largest U.S. dairy company Dean Foods Co on Wednesday , and said it expects packaged-food stocks to further fall about 5 percent to 7 percent due to weak volume growth.
The brokerage said Hershey could report inventory reductions at its customers in the first quarter and downgraded the stock to "underperform" from "neutral."
"Our experience is that confectionery manufacturers have very weak visibility into inventory levels because they sell to such a fragmented set of customers and because confectionery items have rather long shelf life," said Credit Suisse, which cut its price target on the stock to $30 from $34.
The brokerage expects average branded-packaged-foods volume to decline 0.5 percent in 2009, and it said wholesalers are wary of buying as manufacturers offer very little visibility on where pricing is going next.
Credit Suisse downgraded Dean Foods to "neutral" from "outperform," saying the company's growth will begin to slow as milk prices increase and that the stock has already priced in potential cost savings.
"Even (Dean's) management admits that cost savings are not big enough to insulate the company's earnings from the inherent volatility of operating in a rather commoditized industry," Credit Suisse said. It trimmed its target on the stock to $22 from $24.
Credit Suisse also cut its price targets on the shares of Kellogg , Kraft Foods and ConAgra Foods .
Shares of Dean Foods fell more than 5 percent to $19.25, while those of Hershey were down more than 2 percent at $34.59 in Wednesday midday trade on the New York Stock Exchange.