On Jan 22, we maintained a Neutral recommendation on
Coca-Cola Enterprises, Inc
), following the appraisal of its third quarter results.
Why the Neutral Recommendation?
More than 90% of the sales volume of Coca-Cola Enterprises
comprises products of
The Coca-Cola Company
). In October 2012, Coca-Cola Enterprises sold its North American
operations to The Coca-Cola Companyand took over the latter's
bottling operations in Norway and Sweden.
Coca-Cola Enterprises has thus transformed itself into an
exclusive western European bottler. The company is thus exposed
to the economic uncertainty of this region, including steep price
competition in Great Britain and headwinds from increased taxes
on beverages with sweeteners in France.
Moreover, Coca-Cola Enterprises' second and third quarters
were challenging mainly due to volume softness and currency
Coca-Cola Enterprises' third quarter 2012 earnings of 71 cents
per share beat the Zacks Consensus Estimate by 2.9%. Earnings,
however, declined 1.4% over the prior-year quarter due to
currency headwinds and lower revenues and margins. Volumes
improved slightly in the quarter, though they are expected to
decline in the fourth quarter.
Despite back-to back challenging quarters, volume softness and
economic challenges in Europe, we are optimistic about the
company's long-term fundamentals. We appreciate its strong brand
portfolio and solid cash position. The company is one of the
largest Coca-Cola bottlers in the world.
Further, its cost saving initiatives and accelerated share
buybacks are aimed at offsetting the headwinds from a soft
operating environment. Moreover, the financial outlook for 2013
provided at the analyst day meet in mid-December 2012, remained
Other Stocks to Consider
Coca-Cola Enterprises carries a Zacks Rank #3 (Hold). Other
stocks in the beverage industry that are currently performing
Coca-Cola Hellenic Bottling Company S.A.
The Coca-Cola FEMSA S.A.B. de C.V.
). Both the companies carry Zacks #2 Rank (Buy).
COCA-COLA ENTRP (CCE): Free Stock Analysis
COCA COLA HELNC (CCH): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
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