NEW YORK--Shares of The Hershey Co. (HSY) fell nearly 10% on Monday, after the candy maker said it would raise prices and an analyst downgraded the stock.

Shares fell $4.02, or 9.6%, to $37.60 during midday trading. The stock has traded between $32.31 and $47.59 during the past year.

After the market closed on Friday, the Hershey, Pa.-based company said it will raise prices by an average of 11%, due to rising commodity costs. Hershey also lowered its earnings expectations for 2008 and 2009.

Citigroup (C) analyst David Driscoll on Friday downgraded the company to "Hold" from "Buy" in a note to investors.
He said the price increases are a "good sign" that Hershey is protecting its margin structure. However, he lowered his earnings estimates and said the company still has issues it needs to work on.

"If sales trends continue to accelerate, it is possible that there could be significant upside to earnings; however, visibility on this is limited and risk remains that it does not materialize," he wrote.

Meanwhile, Stifel Nicolaus & Co. analyst Christopher Growe said the "Sell" rating is mainly due to the recent increase in the company's share price. Since the beginning of July, the stock has climbed 27%.

"Our rating is, in effect, a valuation call given the recent run-up in the stock price accompanied by heavy option activity in August and September," Growe wrote. "The less-than-inspiring fundamentals provide a backdrop for share price weakness ahead."