Zacks_Analysts' Blog : Coke Enterprises Beats & Raises - Analyst Blog

Coca-Cola Enterprises (CCE) reported its second consecutive quarter of strong results, with earnings of $0.67 per share. Earnings were $0.24 above Zacks Consensus Estimate of $0.43, driven by benefits of price and package initiatives in North America, volume and pricing growth in Europe and efficient cost control mechanisms.  

 

Net operating revenues during the quarter were almost flat year over year, declining marginally by 0.5%. Benefits of positive net pricing (+8.5% in North America and +4.0% in Europe) was partially offset by 3.5% volume declines in North America. Volumes in Europe grew 6.5%. Currency translations negatively impacted the top-line by 6.5%. Overall physical case and can volume declined 1.1% while net revenue per case increased 8.0% year-over-year.

The Board also raised dividend by $0.04 to $0.32 per share, effective with the dividend payment in September. The dividend increase is testimony of the company’s confidence in its key growth strategies and its ability to generate strong cash flow, going forward.    

In North America, revenues grew 2.5% driven by strong execution, improved efficiency, and a continued balance between price and costs. A key element of the balance between price and costs is the implementation of the new price package architecture, which is creating more value for customers, enhancing brand equity, and attracting new consumers.

Although overall volumes were soft, an encouraging trend was observed in the carbonated beverage category (CSD). The CSD category benefited from the revitalization plan introduced in 2008, which provided improved and more strategic marketing benefits.                      

European revenues grew 10.5% driven by strong market share gains across its operating territories, despite a sluggish economy. Volumes also grew 6.5% driven by strong growth in the CSD category which was up more than 7%.

Based on the robust performance during the first half of 2009, management raised guidance for the full year. Earnings were raised by $0.20 in the range of $1.44 to $1.49 per share. Previous guidance range was $1.24 to $1.29. The guidance includes full year negative currency impact of approximately $0.15.

In North America, revenues for 2009 are expected to increase in a low to mid single-digit range. Volumes are expected to decline and cost of goods per case are expected to increase in the mid to high single-digit range. This is driven by the mix impact of increased sales of purchased finished goods and higher commodities cost.

Revenues in Europe are expected to grow in the mid single-digit range. Volumes growth is expected in the low single-digit range and cost of goods per case is expected to increase in a low single-digit range, reflecting moderation in the commodity cost environment.

Pepsi Bottling Group (PBG), Coca-Cola Enterprises’ primary competitor, reported second quarter earnings of $0.96 per diluted share, representing approximately a 30% increase from the guidance range of $0.70 and $0.74.