Coca-Cola Enterprises Profits Soar - Analyst Blog

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Recently, Coca-Cola Enterprises Inc. ( CCE ) announced its fourth-quarter 2011 reported and adjusted earnings of 36 cents per share, in line with the Zacks Consensus Estimate. This also compares favorably with reported and adjusted earnings of 28 cents in the year-ago quarter. A solid volume growth coupled with price increases and favorable currency translation effect led Coca-Cola Enterprises to deliver better-than-expected quarterly result.

The company's adjusted earnings of $2.18 per share for fiscal 2011 handily beat the Zacks Consensus Estimate of $2.17 and increased over 22% from the previous fiscal adjusted earnings of $1.78. The increase in earnings was primarily driven by increased pricing and volume growth. On a reported basis, excluding items affecting comparability, earnings per share grew over 25% to $2.29 from $1.83 reported in the previous fiscal.

The results for the reported quarter include operations of Norway and Sweden, excluding the company's North American operation. During the fourth quarter of 2010, Coca-Cola Enterprise divested its North American bottling business to the beverage giant The Coca-Cola Company ( KO ).

Coca-Cola Enterprises, a newly registered company, includes its legacy European bottling operations and the bottling operations acquired from the Coca-Cola Company in Norway and Sweden.

Quarterly Details

During the quarter, Coca-Cola Enterprises' sales increased 5.5% to $1,893 million on a comparable basis from $1,794 million in the year-ago period. The sales increase was attributable to a rise of 3% in volume in all territories, followed by a surge of 2.5% in product prices. Revenues were in line with the Zacks Consensus Estimate.

Gross profit for the quarter increased 5.7% to $670 million on a comparable basis from $634 million recorded in the year-ago quarter. Operating income also surged 27.8% to $184 million from $144 million recorded in the year-ago quarter. Moreover, Coca-Cola Enterprises' operating margin improved 170 basis points to 9.7% in the reported quarter.

Balance Sheet, Cash Flow and Dividend

Coca-Cola Enterprises exited fiscal 2011 with cash and cash equivalents of $684 million compared with $321 million in fiscal 2010. During fiscal 2011, the company generated $862 million of cash from operations and deployed $376 million toward capital expenditure.

Prior to this, Coca-Cola Enterprises raised its quarterly dividend by 23% to 16 cents per share, marking the company's fifth consecutive year of increased dividend. The dividend will be paid on March 22, 2012 to the shareholders of record as of March 9, 2012.

Share Repurchase

During the reported quarter, Coca-Cola Enterprises completed its $1 billion share repurchase program started in the fourth quarter of fiscal 2010. The company has recently announced a new share repurchase program worth $1.0 billion. The company is anticipating to buyback at least $500 million worth of shares in fiscal 2012, subject to economic, operating and other factors.

Fiscal 2012 Guidance

Looking into 2012, the company continues to anticipate growth, marking the seventh consecutive year of growth with results at or above its long-term objectives.

The company projects 2012 earnings per share to rise 10%, driven by solid operating income growth of mid-single digit and high-single digit in revenue, and continued execution of its planned share repurchase program. The Zacks Consensus EPS Estimate for 2012 is $2.27.

Moreover, in a move to enhance operational efficiency and improve customer services, the company is applying a new initiative in Norway, which will facilitate Coca-Cola Enterprises to transform its business into third-party and customer warehouse delivery from direct store delivery.

For this, the company will make a capital expenditure of $60 million and restructuring expenses of $50 million. Further, the company expects to generate free cash flows of $500 to $525 million in 2012.

Coca-Cola Enterprises, which competes with Kraft Foods Inc. ( KFT ) and Pepsico Inc. ( PEP ), currently has a Zacks #3 Rank, implying a short-term Hold rating. Moreover, we maintain a long-term Neutral recommendation on the stock.

COCA-COLA ENTRP ( CCE ): Free Stock Analysis Report

KRAFT FOODS INC ( KFT ): Free Stock Analysis Report

COCA COLA CO ( KO ): Free Stock Analysis Report

PEPSICO INC ( PEP ): Free Stock Analysis Report

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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 Nasdaq, Inc.

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

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