Hershey (NYSE: HSY) closed at $40.23 Wednesday. HSY call volume was heavy on August 6, with 21,092 contracts trading. HSY August option implied volatility is at 56, September at 44; above its 26-week average of 30 according to Track Data, suggesting larger price movement.

Rambus (NASDAQ: RMBS) closed at $15.34 Wednesday. RMBS is the frequent subject of patent infringement & anti-trust claim issues. Hynix Semiconductor, Samsung Electronics and Micron Tech (NYSE-MU) have had patent infringement suits with RMBS. RMBS September option implied volatility of 103 is above its 6-month average of 74 according to Track Data, suggesting larger price movement.

Financial Select Sector-XLF overall volatility at 39; 26-week average is 38

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Kraft (NYSE: KFT) had one heck of a second quarter. It was a lot better than I thought it would be. As Melly Alazraki reported in her Before the bell post on Monday, Kraft managed to demolish analyst expectations by delivering 58 cents per share to the bottom line, a number that no only represented a 16% growth but that was 8 cents better than what Wall Street analysts were looking for. Overall, net revenues soared over 21%, while organic-revenue growth came in at roughly 7%. Not bad at all.

Even with the hellish inflation of input costs dogging it, Kraft managed to engage a price-increasing strategy that not only defended the bottom line but helped it thrive. How could it do this? Brand power, my friends. Looks like investors underestimated that power, and the fact that people are willing to pay more for the things they love.

Of course, it might be understandable that investors would not be willing to credit Kraft and its portfolio with such earnings-beating potential considering that there's so much competition out there from generic brands and that fuel costs are eating into supermarket budgets. Yet, the numbers support Kraft's current strategies. Volume wasn't too negatively affected in my opinion, and the margins turned out to be just fine -- something investors love to see when inflation is out front every single day in the headlines.

Management is confident enough about the fiscal year to issue tastier guidance. Organic-revenue growth should be 6% or higher as opposed to 5%, and adjusted earnings per share should come in around $1.92 or higher, which is two pennies better than the previous outlook. At the stock's current yield and forward P/E ratio, it looks attractive.

One thing I'd be cautious about is the ongoing ability of Kraft to pass on price changes. Consumer-food companies like Kellogg (NYSE: K), General Mills (NYSE: GIS), Hershey (NYSE: HSY) and PepsiCo (NYSE: PEP) are all betting on their strong brands to convince cash-challenged consumers that their product portfolios are worth any extra money they may need to charge. It's a risk to keep in mind when you perform your due diligence on Kraft.

I think Kraft will continue to succeed in convincing consumers that they need to pay up for the company's foodstuffs. Hey, who can live without Fig Newtons, right?

Disclosure: I don't own any company mentioned; positions can change at any time.

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Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) net income nearly doubled, topping Wall Street estimates.
• American Express Co. (NYSE: AXP) Q2 earnings fell well short of analysts estimates on credit crisis.
• Amphenol Corp. (NYSE: APH) beat Q2 expectations and offered Q3 and full-year guidance.
• A.O. Smith Corp. (NYSE: AOS) beat Q2 earnings estimates and boosted its full-year guidance.
• Apple Inc. (NASDAQ: AAPL) beat Q3 estimates but offered lower-than-expected guidance.
• Bank of America Corp. (NYSE: BAC) Q2 earnings tumbled but still beat Wall Street expectations.
• Boeing Co. (NYSE: BA) Q2 results missed estimates but it reaffirmed its full-year guidance.
• Broadcom Corp. (NASDAQ: BRCM) crushed expectations but offered muted guidance.
• Caterpillar Inc. (NYSE: CAT) posted better-than-expected Q2 earnings and offered guidance.
• Ceragon Networks Ltd. (NASDAQ: CRNT) reported strong earnings on increased global demand.
• Charles Schwab Corp. (NASDAQ: SCHW) topped Q2 estimates on rises in new accounts and assets.
• CME Group Inc. (NYSE: CME) better-than-expected Q2 results lifted the share price from a 52-week low.
• Crocs Inc. (NASDAQ: CROX) revised its Q2 and full-year guidance downward on market conditions.
• EI DuPont de Nemours & Co. (NYSE: DD) Q2 results beat expectations due to strength in agriculture.
• Ericsson LM TEL Co. (NASDAQ: ERIC) Q2 profits tumbled due to costs of R&D and acquistions.
• E*Trade Corp. (NASDAQ: ETFC) had a bigger-than-expected Q2 loss on Fannie Mae (NYSE: FNM) losses.
• Ford Motor Co. (NYSE: F) posted a record quarterly loss, mostly one-time charges.

• Great Atlantic & Pacific Tea Co. (NYSE: GAP) narrowed its Q1 loss as sales increased.
• Hasbro Inc. (NYSE: HAS) posted strong Q2 results that beat analysts expectations.
• Hershey Co. (NYSE: HSY) posted strong Q2 results on price increases and production efficiencies.
• Intuitive Surgical Inc. (NASDAQ: ISRG) beat Q2 expectations with its 23th straight quarter of growth.
• Jefferies Group Inc. (NYSE: JEF) surprized Wall Street with a Q2 profit instead of a loss.
• Kimberly-Clark Corp. (NYSE: KMB) Q2 results matched expectations and guidance was in-line.
• LG Electronics Inc. saw Q2 earnings soar on strong sales of flat panel TVs and wireless handsets.
• McDonald's Corp. (NYSE: MCD) posted a stronger-than-expected Q2 profit but warned of price increases.
• Merck & Co., Inc. (NYSE: MRK) topped analysts' earnings expectations but offered no guidance.
• New York Times Co. (NYSE: NYT) beat Q2 profit estimates and upped the newstand price.
• PepsiCo Inc. (NYSE: PEP) reported strong Q2 results despite commodity price increases.
• Pfizer Inc. (NYSE: PFE) posted better-than-expected Q2 results and reaffirmed its full-year guidance.
• RadioShack Corp. (NYSE: RSH) Q2 earnings soared due to increased online sales.
• Resources Connection Inc. (NASDAQ: RECN) had better-than-expected results and bought back shares.
• St. Jude Medical Inc. (NYSE: STJ) Q2 results beat expectations and it raised its Q3 and full-year guidance.
• Tempur-Pedic International Inc. (NYSE: TPX) beat Q2 estimates and issued in-line guidance.
• Texas Instruments Inc. (NYSE: TXN) posted disappointing Q2 results due to decreased demand.
• UAL Corp. (NASDAQ: UAUA) posted better-than-expected results and announced job and fleet cuts.
• Vocus Inc. (NASDAQ: VOCS) posted it's 36th consecutive quarter of revenue growth.
• Wachovia Corp. (NYSE: WB) swung to a larger-than-expected loss in Q2 and slashed its dividend.
• Washington Mutual Inc. (NYSE: WM) reported a multi-billion-dollar loss on further write-downs.
• Yahoo! Inc. (NASDAQ: YHOO) disappointing Q2 results included only minimal revenue growth.

Upcoming quarterly reports to look for include Kraft Foods (NYSE: KFT), Verizon (NYSE: VZ), U.S. Steel (NYSE: X), Viacom (NYSE: VIA), Starbucks (NASDAQ: SBUX), Walt Disney (NYSE: DIS), Motorola (NYSE: MOT), and Exxon Mobil (NYSE: XOM).

Visit AOL Money & Finance for more earnings coverage.

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On Monday July 28, Kraft (NYSE: KFT) will be reporting its earnings results for the second quarter. Kraft is a well-known manufacturer of supermarket foodstuffs. We all know the brands: Oreo cookies, Nabisco, Oscar Meyer and many, many others.

It should be a defensive stock, just like Campbell Soup (NYSE: CPB) or PepsiCo (NYSE: PEP), right? Well, it is and it isn't. It's defensive in the sense that, as the cliche goes, people still want to eat their favorite foods even during recessionary times. It isn't in the sense that the stock is down by 16% (as of this writing) in the one-year time period. It does have a nice dividend yield, however, and Warren Buffet seems to like it.

What should investors be looking for on Monday? Well, they should definitely be looking at the margins. Is Kraft navigating this inflationary period in as efficient a manner as possible? I think Kraft will do OK in this regard. I'm not expecting any sort of wide expansion of gross margin, but I think management will report stability in this area.

Hershey (NYSE: HSY) , which recently reported numbers for its own quarter (see Brent Archer's idea for a trade involving Hershey options), did well in keeping margin-erosion at bay. Hershey also beat estimates by a penny. Considering that Kraft beat analyst estimates last quarter, that it has a good history of going beyond expectations and that Hershey was able to beat, then I would have to say that Kraft should have no problem beating on Monday. Hershey has had its share of troubles lately, keep in mind.

Also, according to Earnings.com, Kraft earned 50 cents per share a year ago, and the call is for 50 cents per share on Monday. It shouldn't be too difficult to eke out a little growth, should it?

Investors will also want to look for news on price increases and volume trends. Many companies these days have been talking about passing on commodity-cost pressures to consumers, and Kraft is no different. Will the public take to such increases? As I alluded to before, Kraft has a powerhouse stable of products. People who love Ritz crackers will pay whatever price they need to pay to keep the item in their pantries. Will Kraft have any new marketing campaigns to keep up the brand equity? This is also crucial stuff.

In terms of Kraft being a trade going into earnings, I see that as a challenging situation at best. Consider the following: McDonald's (NYSE: MCD) sold off a little when it released its earnings; concern about the margins was mentioned. You'll note that McDonald's did very well on the bottom line, beating by 8 cents. Yet, it wasn't enough to overshadow other issues, and the stock did nothing. Personally, I think McDonald's deserved a higher bid on the results. But hey, it doesn't matter what I think, the market will do what it pleases. And when the market is volatile, a new thing pleases it (or irritates it) each day.

That's why I'm not infatuated with a Kraft-earnings trade. Maybe McDonald's sold off because it's been a stronger stock and investors were looking for an excuse to take some money off the table. Still, I'm not convinced. The best thing to do might be to wait until after earnings are issued to see the hard numbers and the reaction to the stock. Then, if you're still interested in Kraft, you could do something at that point.

Disclosure: I don't own any company mentioned; positions can change at any time.

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After hitting a one-year high of $48.77 in August, the stock hit a one-year low of $32.31 earlier this month. HSY opened this morning at $35.55. So far today the stock has hit a low of $35.32 and a high of $36.81. As of 1:00, HSY is trading at $36.40, up $1.45 (4.1%). The chart for HSY looks bearish and improving, while S&P gives the stock a bearish 1 Star (out of 5) Strong Sell rating.

For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just four months as long as HSY is above $30 at November expiration. Hershey would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.

HSY hasn't been below $32 at all in the past year and has shown support around $32 recently. This trade could be risky if the economic situation continues to deteriorate, but even if that happens, this position could be protected by the support the stock might find near its year low just above $32.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in HSY.

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This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

One might assume that chocolatier Hershey Company (NYSE: HSY) got its name from the small Pennsylvania town it is located in, population 12,771. However, the truth of the matter is that the company is named after its founder, Milton S. Hershey, and that the town, which was formerly known as Derry Church, was renamed Hershey, Pennsylvania, in 1906 because of the popularity of the chocolate.

Milton Hershey built the milk processing plant he would use to make his milk chocolate in 1896 with profits he made from selling his caramel company, and three years later, in 1899, the "Hershey process" was born. In 1903, Hershey began construction of a chocolate plant in what would later become Hershey, Pennsylvania. The manufacturing plant, which now covers over two million square feet of manufacturing space, is now the largest chocolate factory in the world.

Just as important to the town's prosperity as the chocolate manufacturing plant is Hersheypark, an amusement park that is affiliated with the Hershey Company. The theme park is a huge employer for the town, a tourist attraction, and a branding device for the Hershey brand.

Hershey, Pennsylvania is truly a place where the company and the town have merged into a single identity. While there, you can tour Hershey's Chocolate World, Hershey Museum, and visit Hersheypark, all of which feature the history of both the company and the town, which will be forever intertwined.

Be sure to check out more Big Company, Small Town posts.

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Hershey (NYSE: HSY) is having growth problems. Not only is it tough just navigating this high-inflationary period, but it's difficult keeping up with the competition. Consumers have a lot of candy choices, and even though Hershey is a big brand name in confections, it thinks it can do better in the marketing department. According to this Wall Street Journal (subscription required) piece, Hershey intends on implementing a 20% increase in spending for promotions.

This double-digit jump in marketing is a smart move, but it won't be easy to digest. With the aforementioned inflationary pressures on the rise, Hershey is going to be sufficiently challenged to push growth while balancing the upward trends in input costs. But is there really a choice here? When you have a super brand like Hershey running into trouble, the thing you need to do is get out there and prop up the inherent equity of the product portfolio.

Yet, there's a bit of a conundrum here, I think. Hershey needs to get people to buy its delicious candies (I'm certainly a fan of the awesome Reese's Peanut Butter Cup). Which demographic loves sweets? Younger kids. They would have represented a great group for growth opportunities, but Hershey has to be careful about marketing too much to this demo since the country has, rightly so, been focusing on healthy alternatives to fatty foods. Even though Hershey has been trying to make some of its portfolio healthier, the flagship brands will always be, one assumes, sugary and full of empty calories. In fact, Hershey is more than aware of this issue, as this corporate link demonstrates.

Hershey's management will have to be as creative as possible to produce innovative advertising campaigns that are both fun and aware of who is being targeted. If it were up to me, I'd go after the college-age demo via a crafty, humorous television campaign, something really funny, like those messing-with-Sasquatch ads. Differentiating its brand is more important than ever considering the recent marriage between competitors Mars and Wrigley (NYSE: WWY).

As for the stock, it isn't far from a 52-week low, and although I believe very long-term investors will do well with it considering its yield, I think the shares will be stuck in the basement for a lengthy period of time. Once Hershey gets its act together, things will obviously improve for shareholders, but for now, Hershey is hitting a difficult rough spot.

Disclosure: I don't own any company mentioned; positions can change at any time.

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MAJOR PAPERS:

• Steven Spielberg and his DreamWorks Animation SKG Inc (NYSE: DWA) partners are close to signing a deal with India's Reliance ADA Group for between $500M and $600M that would provide financing to the company as it prepares to leave Viacom Inc's (NYSE: VIA) Paramount Pictures this year, the Wall Street Journal reported. DreamWorks will seek to obtain an additional $500M in debt financing to make about six new films a year.
• The Wall Street Journal also reported that at an investor update yesterday, The Hershey Company (NYSE: HSY) CEO David West said the chocolate-bar maker would boost spending on marketing about 20% this year and next, and slightly increased the company's long-term annual sales targets. West offered little detail on how Hershey will address its reliance on the U.S. market for revenue.

• The Economic Times reported that India's Maneesh Pharmaceuticals, a mid-sized company, bought a 51% stake in U.S.-based Synovics Pharmaceuticals Inc (OTC: SYVC). The terms of the deal were not disclosed.
• The Economic Times also reported that General Electric Company's (NYSE: GE) GE Money Financial Services, which was seeking a parter for its personal and home loan portfolios, may have called off the process after it was unable to get the right valuation.
• Bob Nardelli, the chairman and CEO of Chrysler LLC, sent a memo to employees warning them of worsening U.S. sales, the Detroit News reported. The e-mail did not indicate the auto maker would look to soon further cut production or lay off staff, a person familiar with the matter said.

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Talk about a tough time in the markets. Between the financial crisis and oil prices rising on an almost daily basis, with the Fed damned if it raises rates and damned if it doesn't, the floods in the Midwest are now threatening to make a trip to the supermarket much more expensive. Yes, break out the coupons and pray for sales, because, according to The Wall Street Journal [subscription], food prices are destined for one direction: higher. That's because a lot of farmland has been damaged, throwing the supply-demand dynamic into chaos.

What does this mean for investors? Look for potential pressure on the stocks of companies such as Coca-Cola (NYSE: KO), PepsiCo (NYSE: PEP), Kraft (NYSE: KFT), Kellogg (NYSE: K), General Mills (NYSE: GIS), and Hershey (NYSE: HSY). I happen to own Coke, and I've heard the news reports talking about how higher corn prices will affect Coke and Pepsi because they use corn syrup as an ingredient for their sodas. It's also been pointed out by others that PepsiCo owns Frito-Lay, and since that company manufacturers salty snacks such as Doritos and Tostitos (I love them both), corn prices will also have an impact on that division.

If you're a trader, be wary. We might be in for a rough ride this summer with not only the stocks I've mentioned here, but in a general sense. Since I own Coke, I've been acutely aware of the pullback experienced in that stock as the external pressures surround it. As I write this, the stock is trading at $54.27. The shares were over $65 during their wonderful stay at the 52-week-high suite. So, yes, buyers with short-term mentalities must be wary. However, long-term investors should look upon any pullbacks as potential opportunities for some of these food-selling companies. If you don't intend to trade, then adding to a Coke or Pepsi position might make sense.

Disclosure: I own Coke; positions can change at any time.

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Monday, June 16

• Lehman Brothers Holdings Inc. (NYSE: LEH) reporting Q2 earnings; conference call at 10:00 am.
• Nvidia Corporation (NASDAQ: NVDA) to discuss new GPU products at 1:00 pm.
• Lime Energy Co. (NASDAQ: LIME) to discuss acquisition of Applied Energy Management at 4:00 pm.
• Adobe Systems Inc. (NASDAQ: ADBE) reporting Q2 earnings; conference call at 5:00 pm.

Tuesday, June 17

• La-Z-Boy Inc. (NYSE: LZB) to report Q4 earnings; conference call at 8:30 am.
• The Hershey Company (NYSE: HSY) to hold business update conference call at 8:30 am.
• Best Buy Inc. (NYSE: BBY) to report Q1 earnings; conference call at 10:00 am.

Wednesday, June 18

• FedEx Corporation (NYSE: FDX) to report Q4 earnings; conference call at 8:30 am.
• Morgan Stanley (NYSE: MS) to report Q2 earnings; conference call at 11:00 am.
• Healthways Inc. (NASDAQ: HWAY) to report Q3 earnings; conference call at 5:00 pm.

Thursday, June 19

• PDUFA date for Eurand's (NASDAQ: EURX) Zentase.
• PDUFA date for GlaxoSmithKline's (NYSE: GSK) Promacta.
• The J.M. Smucker Company (NYSE: SJM) to report Q4 earnings; conference call at 8:30 am.

Friday, June 20

• PDUFA date for Millenium Pharmaceuticals' (NASDAQ: MLNM) Velcade for treating front-line multiple myeloma.
• Winnebago (NYSE: WGO) to report Q3 earnings; conference call at 10:00 am.

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Hershey (NYSE: HSY) David J. West, President and CEO of HSY, will provide an update on the company's strategic direction on June 17, 2008.

HSY is the frequent subject of M&A and ownership restructuring chatter.

HSY July option implied volatility of 38 is above its 26-week average of 28 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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The Hershey Co. (NYSE: HSY) is recently up 98 cents to $37.49. HSY has a market cap of $8.4 billion with long term debt of $1.5 billion. HSY call option volume of 12,177 contracts compares to put volume of 1,008 contracts. HSY June option implied volatility of 37 is above its 26-week average of 27 according to Track Data, suggesting larger price movement.

Biogen's (NASDAQ: BIIB) recent volatility has collapsed after Carl Icahn proposed a slate of directors.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Hershey (NYSE: HSY) has a market cap of $7.9 billion with long term debt of $1.5 billion.

HSY reported Q1 consolidated net sales of $1.6 billion on April 24. The Hershey Trust Co. holds the largest stake in HSY.

The WSJ reported Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.B) were close to a pact to acquire WM. Wrigley Jr.Co (NYSE: WWY) for more than $22 billion according to people familiar with the situation.

HSY May option implied volatility of 25 is below its 26-week average of 27 according to Track Data, suggesting slightly less price uncertainty.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Here are some highlights from this past week's earnings coverage from BloggingStocks:

• American Axle & Manufacturing Holdings Inc. (NYSE: AXL) reported a strike-related Q1 loss.
• Arch Coal Inc. (NYSE: ACI) Q1 profit tripled on increased demand and higher prices.
• Boeing Co. (NYSE: BA) posted better-than-expected earnings despite Dreamliner delays.
• Coach Inc. (NYSE: COH) better-than-expected quarter didn't impress Jim Cramer.
• ConocoPhillips (NYSE: COP) reported Q1 earnings and revenue above analysts' forecasts.
• Delta Air Lines Inc. (NYSE: DAL) reported a big loss on a one-time charge and fuel costs.
• Dow Chemical Co. (NYSE: DOW) posted a smaller-than-forecast profit drop and predicted a good Q2.
• EI DuPont de Nemours & Co. (NYSE: DD) Q1 earnings rose 26% but missed expectations.
• Ford Motor Co. (NYSE: F) surprised Wall Street by swinging to a profit in the first quarter.
• Goodyear Tire and Rubber Co. (NYSE: GT) easily surpassed analyst estimates for the first quarter.
• Halliburton Co. (NYSE: HAL) Q1 earnings and revenue rose due to international growth.
• Hershey Co. (NYSE: HSY) profit fell but was in line with analysts' expectations.

• JetBlue Airways Corp. (NASDAQ: JBLU) reported a narrower-than-expected loss in the first quarter.
• Lockheed-Martin Corp. (NYSE: LMT) posted solid Q1 results and raised its full-year outlook.
• McDonald's Corp. (NYSE: MCD) easily beat Q1 estimates due to gains overseas.
• Northwest Airlines Corp. (NYSE: NWA) reported a larger-than-expected loss due to fuel costs.
• PepsiCo Inc. (NYSE: PEP) posted solid Q1 results that were merely inline with expectations.
• Pepsi Bottling Group (NYSE: PBG) earnings were flat, but beat Wall Street expectations by a penny.
• Potash Corp. of Saskatchewan Inc. (NYSE: POT) posted strong results on strong demand and price hikes.
• Sonoco Products Co. (NYSE: SON) reported better-than-expected Q1 results and revised guidance.
• Starbucks Corp. (NASDAQ: SBUX) preliminary Q2 results were lower than analyst's expected.
• 3M Co. (NYSE: MMM) beat earnings expectations and reaffirmed its guidance.
• UAL Corp. (NASDAQ: UAUA) posted a worse-than-expected Q1 loss on rising fuel prices.
• US Steel Corp. (NYSE: X) better-than-expected quarter didn't impress Jim Cramer.
• Yum! Brands Inc. (NYSE: YUM) Q1 profits soared on overseas strength, and raised its guidance.

Also, Jim Cramer discusses "crummy lenders" and Jonathan Berr wonders if Ford's turnaround is for real. Joseph Lazzaro considers Citigroup Inc. (NYSE: C) as a barometer of the economy. One analyst thinks financials may have hit bottom and it may be time to buy, and Jon Ogg looks at what short sellers are making of tech stocks. Ted Allrich discusses what to sell/what to buy.

Upcoming results to watch for include Verizon Communications (NYSE: VZ), Tyson Foods (NYSE: TSN), CBS Corp. (NYSE: CBS), Countrywide Financial (NYSE: CFC), U.S. Steel Corp. (NYSE: X), Office Depot (NYSE: ODP), General Motors (NYSE: GM), Procter & Gamble (NYSE: PG), Kraft Foods (NYSE: KFT), Starbucks (NASDAQ: SBUX), Time Warner (NYSE: TWX), Comcast (NASDAQ: CMCSA), Exxon Mobil (NYSE: XOM), and Chevron (NYSE: CVX).

Visit AOL Money & Finance for more earnings coverage.

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Shares of PepsiCo Inc. (NYSE: PEP), and Hershey Co. (NYSE: HSY) fell as investors were worried that soaring commodity prices would hurt profit.

Net income at Pepsi increased to $1.15 billion, or 70 cents a share while sales soared 13 percent to $8.33 billion. The company benefited from strong international sales. It also reaffirmed 2008 guidance of "high-single-digit net revenue growth" and earnings of at least $3.72. Analysts were expecting profit of $3.73 on revenue of $42.85 billion, according to Thomson Financial.

"We delivered a strong first quarter," said Chief Executive Indra Nooyi in the earnings release. "During the quarter, we faced the challenge of a macroeconomic slowdown in the U.S. and continued global commodity inflation, but the strength and breadth of our global footprint and portfolio helped us deliver strong first quarter results."

The picture at Hershey was hardly sweet. Net income fell to $63.2 million, or 28 cents per share, compared with $93.5 million, or 40 cents, a year earlier. Total cost and expenses rose to $1 billion from $942.7 million.
Revenue rose $1.16 billion. Analysts had expected profit of 39 cents on revenue of $1.17 billion. The chocolate maker also reaffirmed its profit of $1.85 to $1.90 on sales growth of 3 to 4%. Wall Street consensus is for profit of $1.84 on revenue of $5.09 billion.

The problems caused by food inflation have only begun.

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• Mattel (NYSE:MAT) to report Q1 earnings; conference call at 8:30am.
• Halliburton (NYSE:HAL) reports Q1 earnings; conference call at 9:00am.
• Bank of America (NYSE:BAC) to report Q1 earnings; conference call at 9:30am.
• Toronto-Dominion (NYSE:TD) t o hold conference call about the acquisition of Commerce Bancorp (CBH) at 11:00am.

• Wyeth (NYSE:WYE) to report Q1 earnings; conference call at 8:00am.
• The Federal Reserve to host a meeting regarding the Countrywide Financial (NYSE:CFC) takeover by Bank of America at 9:30am.
• AT&T (NYSE:T) to report Q1 earnings; conference call at 10:00am.
• Lockheed Martin (NYSE:LMT) to report Q1 earnings; conference call at 11:00am.
• Yahoo (NASDAQ:YHOO) to report Q1 earnings; conference call at 5:00pm.

• Biovail (NYSE:BVF) PDUFA date for NDA of BVF-033 for the treatment of depression.
• UPS (NYSE:UPS) to report quarterly earnings; conference call at 8:30am.
• General Motors (NYSE:) to hold conference call on 1Q08 global sales at 9:00am.
• Delta (NYSE:DAL) to report Q1 earnings; conference call at 10:00am.
• Amazon.com (NASDAQ:AMZN) to report Q1 earnings; conference call at 5:00pm.

• Hershey (NYSE:HSY) to report Q1 earnings; conference call at 8:30am.
• Microsoft (NASDAQ:MSFT) to report Q3 earnings; conference call at 5:30pm.

• Wendy's (NYSE:WEN) to report Q1 earnings; conference call at 9:00am.

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MOST NOTEWORTHY:

• Bernstein downgraded Hershey Foods (NYSE: HSY) to Market Perform from Outperform, citing commodity cost pressures & slowing volume growth.
  
• Thomas Weisel downgraded Genentech (NYSE: DNA) to Market Weight from Overweight after the company reported Q1 results, due to Avastin growth concerns and a lack of meaningful drivers of long-term revenue growth until 2009.
  
• Oppenheimer cut Garmin (NASDAQ: GRMN) to Perform from Outperform on concerns regarding PND pricing and the company's profitability dynamics.

• Blackrock (NYSE: BLK) was downgraded at Goldman to Neutral from Buy and to Market Perform from Outperform at Wachovia.
  
• Baird downgraded Millennium Pharma (NASDAQ: MLNM) to Neutral from Outperform.
  
• JP Morgan lowered Total SA (NYSE: TOT) to Neutral from Overweight.

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"It's time to go value investing," says contrarian Eric Roseman, adding, "It's time to sink your teeth into America's oldest confectionary company" -- The Hershey Corporation (NYSE: HSY).

The editor of the industry-leading Commodity Trend Alert explains, "We love chocolate and want to own a great brand name that is likely to be acquired or partially acquired by a competitor at this low price." Here is his review.

"There's nothing more satisfying than a candy bar -- well, almost. I get even more excited about finding a great company or, in this case, a chocolate franchise selling at a distressed price, paying a nice dividend and home to shareholder activists seeking to boost their return on equity.

"We have regularly sought to identify distressed or contrarian blue chip stocks since 2001. The bottom line has to be deep-value and a strong catalyst for change as corporate earnings perform a 360-degree turn.

"Over the last two years, Hershey's common stock has been a real dog. HSY has shed almost half of its value since 2006, as investors grow frustrated with its board, ownership structure, faltering sales and a rudderless earnings strategy.

"Competition has also been fierce with most of its sales in mature markets, namely the United States, Canada and Mexico. Mars is running circles around Hershey, stripping the latter of market share in the U.S. mainly because of a far more aggressive advertising budget.

"If the above isn't bearish enough, consider virtually every analyst on Wall Street hates this company. But when news gets bad, and a stock gets hammered like Hershey, I start to get interested.

"What I like most about Hershey is its ability to generate strong after-tax cash flow. And free-cash is a must in a bear market or a challenging post-bull market environment for stocks.

"Could Hershey be a target? I've got to think that after a 50% share price plunge and one of the strongest brands in America, guys like Warren Buffett and other investment gurus are starting to look hard at Hershey.

"Over the last few weeks, I've also noticed some private equity and hedge fund boys nibbling at Hershey. That's bullish. And aside from hedge funds, bigger hunters like Wrigley or Nestlé's might also take a stab at Hershey.

"Another positive development is getting rid of Hershey's staid CEO last December and appointi