Coca-Cola Enterprises Inc. (CCE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Coca-Cola Enterprises' first-quarter 2014 adjusted earnings of $0.46 per share beat the Zacks Consensus Estimate by 4.5%. Earnings increased 17.9% over the prior-year quarter driven by expense control initiatives and favorable currency benefits. Revenues, on the contrast, fell short of the Zacks Consensus Estimate and grew only 1% year over year, mainly due to volumes declines, mainly in Great Britain. Disciplined pricing under competitive conditions, the transition in packaging and wet weather conditions led to the decline in that region. However, a decline in operating expenses led to strong operating income growth. Overall, we believe the company's strong brand portfolio, solid share buyback program and cost saving initiatives will help it to ride out the current volatile environment and spur profitability. However, despite some signs of improvement in the Western European economies, overall conditions remain challenging. We, therefore, prefer to remain on the sidelines until we see more meaningful volume growth and maintain our Neutral recommendation on the stock.

Overview:

Coca-Cola Enterprises Inc. (CCE) is engaged in the marketing, production and distribution of non-alcoholic beverages in Western Europe, with more than 90% of the sales volume comprising products of The Coca-Cola Company (TCCC). Headquartered in Atlanta, Ga., Coca-Cola Enterprises Inc. serves a market of more than 170 million consumers throughout Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden.

In Oct 2010, Coca-Cola Enterprises sold its North American operations to TCCC and took over the latter's bottling operations in Norway and Sweden. Coca-Cola Enterprises has thus transformed itself into an exclusive western European bottler consisting of the legacy of Coca-Cola Enterprise's European bottling operations, as well as the bottling operations in Norway and Sweden acquired from TCCC. Coca-Cola Enterprises is TCCC's strategic bottling partner in Western Europe and has a 10-year bottling agreement with the latter, ending on Oct 2, 2020, for each of its territories.

Other than the Coke products, Coca-Cola Enterprises distributes other popular non-alcoholic beverages including Schweppes, Dr Pepper, Oasis and Abbey Well under agreements with Schweppes International Limited, Capri-Sun beverages under agreement with WILD GmbH & Co. KG and Monster beverages under agreements with Monster Beverage Corporation.

In the long term, net sales are expected to grow in the 4 6% range, operating income in the 6 8% range while earnings per share are projected to be in high single digits. The company also expects to improve its return on invested capital by 20 basis points on an annual basis.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CCE , TCCC

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