) reaffirmed its sales and earnings guidance for fiscal 2012 at the
Barclays Back-To-School Conference in Boston.
The company continues to expect earnings per diluted share to be
within a range of $2.18 to $2.24 in fiscal 2012. The Zacks
Consensus Estimate of $2.21 per share falls within this range.
The guidance includes the negative impact of currency
translation and a decline in full-year earnings per diluted share
of 10% and 12%, respectively. Net sales and operating income
are expected to grow in the mid-single digit range.
Coca-Cola Enterprises posted second quarter 2012 adjusted earnings
(excluding the impact of restructuring charges and mark-to-market
commodity hedges) of 73 cents per share, in line with the Zacks
Consensus Estimate. Earnings were down 4% year over year due to a
decline in revenue and volumes.
Currency hurt earnings significantly, by 8 cents. During the
quarter, net sales decreased 8.5% y/y to $2.2 billion. Excluding
impact of currency and the French excise tax (FET) hike, organic
revenues were down 2.0%. Sales lagged the Zacks Consensus Estimate
of $2.29 billion.
The company intends to focus on innovation in new brands, flavor
extensions, new packaging or sweeteners, in order to achieve its
target. In 2012, the company plans to launch products with new
sweetener alternatives, such as Stevia, expand the Fanta line with
new flavors such as mango and passion fruit, and re-launch the
Nestea brand in France and Belgium.
In addition, the company plans some packaging initiatives for
2012 including a new 375 milliliter pocket-sized bottle and a 250
milliliter can. The company's solid marketing strategies employed
during the London Olympics and the Euro Championship are expected
to boost volumes in the upcoming quarters.
COCA-COLA ENTRP (CCE): Free Stock Analysis
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However, Coca-Cola faces several headwinds. Increasing costs of raw
materials, ingredients, or packaging materials, such as aluminum,
sweetener, PET (plastic), fuel and other cost items have been
hurting its margins. The company is geographically focused on
Western Europe and is thus exposed to the economic uncertainty of
some of these countries.
Further, from January 2012, French regulatory authorities
introduced an increased excise tax on beverages with added
sweetener, which is applicable to almost all drinks that the
company sells in France. The company expects this increased tax to
hurt its overall cost of sales by 4% in 2012. Though the company
expects to pass on these costs to consumers in the form of higher
retail prices for its products, a fear of losing customers to its
competitors due to steep pricing creates an overhang.
We appreciate the company's strong brand portfolio. However, the
negative impact of the French excise tax increase, currency
translations and economic challenges in Europe create a significant
overhang. Coca-Cola Enterprises carries a Zacks #3 Rank in the near
term (Hold rating). We currently have a Neutral recommendation on
the company over the long term (3-6 months).