NEW YORK - The Hershey Co., the largest U.S. candy-maker, said yesterday that its fourth-quarter earnings fell 10 percent, below Wall Street's expectations, as sales dipped and a product recall hurt results.

Analysts expressed concerns about the quarter and the company's prospects for 2007, and Hershey's stock fell $1.59, or 3 percent, to close at $50.78 on the New York Stock Exchange.

Morgan Stanley analyst David Adelman said in a note to clients that he was surprised by "the speed with which Hershey's fundamentals and outlook have deteriorated." He pointed to a "fairly broad-based weakness" in the company's performance.

Quarterly net income fell to $153.6 million, or 65 cents a share, from $170.4 million, or 69 cents a share, during the same period in 2005. Excluding a 2-cent-per-share charge from a business realignment, net income was 67 cents a share.

The results missed analysts' estimate of net income of 71 cents a share, according to a Thomson Financial survey.

Revenue fell nearly 1 percent, to $1.34 billion from $1.35 billion in the fourth quarter of 2005. Analysts were expecting revenue of $1.37 billion.

Chairman and chief executive officer Richard H. Lenny said in a conference call that following a "solid" first half of the year, second-half retail performance was weaker as a shift to new products took longer than expected and Hershey's base business slowed, because of poor merchandising or promotional activity and higher competition.

The Hershey, Pa., company said it would refocus its core brands Kisses, Reese's and Hershey's, along with global growth in 2007.

David J. West, the company's chief financial officer who was named chief operating officer yesterday, said the company was "encouraged" by the performance of dark and premium chocolate and drinks, which were up during the quarter. But results were hurt by higher markdown expenses during Halloween and the holiday season because of lower-than-expected sales.

For Hershey's full fourth-quarter and year-end financial report, go to