We maintained our Neutral recommendation on
Coca-Cola Enterprises Inc.
) following appraisal of second quarter 2012 results.
Coca-Cola Enterprises' second quarter 2012 adjusted earnings of
73 cents per share were in line with the Zacks Consensus Estimate.
However, earnings declined 4% over the prior-year quarter due to
currency headwinds and volume declines.
During the quarter, net sales declined 8.5% to $2.21 billion.
Volumes were down 6% in the quarter due to increased retail prices
resulting from the French excise tax increase, strong prior-year
quarter comparisons, weather headwinds throughout the quarter and
ongoing macroeconomic softness.
Despite the tough quarter, volume softness and economic
challenges in Europe, the company's underlying guidance remained
largely unchanged, which is a strong positive. The company expects
adjusted earnings per diluted share to be within $2.18 to $2.24;
including currency headwinds of 10%. The guidance represents growth
of over 10% on a currency neutral basis, which is higher than prior
expectations of currency neutral earnings per share increasing by
The solid marketing programs for the London Olympics together
with easing comparisons, cost-saving efforts and share buybacks are
expected to help the company meet its targets. Overall, we are
optimistic about the company's long-term fundamentals.
Coca-Cola Enterprise is one of the largest Coca-Cola bottlers in
the world. The company is the sole licensed bottler for
The Coca-Cola Company
's (KO) products in Western Europe. Over 90% of the company's sales
volume comprises products of The Coca-Cola Company. The
collaboration helps the company to create and develop new brands,
market products in an efficient manner and also maximize
The company distributes one of the world's most recognized brand
portfolios, with growing core brands led by the Coca-Cola
trademark. Moreover, the company continuously focuses on growing
value of existing brands. The company is also slowly diversifying
its product portfolio beyond the colas which are witnessing
sluggish volume growth in comparison to other emerging categories
like energy and still beverages. Further, the company focuses on
innovation in new brands, flavor extensions, new packaging or
sweeteners. These initiatives ensure customer satisfaction and
thereby generate additional revenue opportunities for the
COCA-COLA ENTRP (CCE): Free Stock Analysis
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